Fitch Rates Denver, Colorado's $114MM GO Bonds 'AA+'; Outlook Stable

AUSTIN, Texas--(Business Wire)--
Fitch Ratings assigns an 'AA+' rating to the City and County of Denver (the
city), Colorado's approximately $104 million general obligation (GO) Better
Denver and zoo bonds, series 2009A, and $14.0 million GO various purpose bonds,
series 2009B. The 2009A and 2009B bonds are scheduled to sell via negotiation
the week of June 8.

Fitch also affirms the following ratings on the city's outstanding debt:

--$551.7 million GO bonds at 'AA+';

--$417 million certificates of participation at 'AA';

In addition, Fitch affirms its 'AA+' rating on the City and County of Denver
Board of Water Commissioners $42.7 million GO bonds.

The Rating Outlook on all of the above bonds is Stable.

The 'AA+' rating reflects Denver's broad and diverse economic base, strong
financial management, voter support for capital programs and exemptions from
state-wide revenue limitations, and notable progress in funding other post
employment benefits (OPEB), balanced by the city's reliance on economically
sensitive sales tax receipts for about one-half of general operations. Current
year declines in sales tax revenues are pressuring the city's financial
operations. The city is supplementing comprehensive budget cuts with the use of
financial reserves, causing its cushion to fall below the city's target 15% fund
balance level but above its 10% floor. By city policy, reserves in this range
can be used to stabilize the city's finances when anticipated revenue growth is
below the historical average but only when accompanied by equal or greater
expense reductions. The city faces additional challenges in the development of
its 2010 budget. In the previous recession, Fitch noted the city's impressive
containment of structural imbalances in its finances due to sound financial
stewardship. Fitch will monitor the city's overall revenue trends, sales and use
tax revenues in particular, and management's response to any additional
deterioration in revenues. The maintenance of adequate financial reserves will
remain key to the city's credit profile in this period of slower economic
growth.

Growth in the city's sales and use tax receipts slowed in 2008, growing by 3.0%
versus the budgeted 5.1% level, resulting in an $8 million shortfall. The 2009
budget initially projected sales and use tax growth of 1.9%, which was
subsequently revised downward to flat growth, resulting in a $56 million budget
gap. Approved budget cuts closed 79% of the gap; the remaining imbalance,
totaling $12 million, was to be absorbed with available reserves. Due to
continued deterioration in sales and use tax revenues, the city is now
projecting a significant 5.8% decline for the current year, resulting in another
$10 million budget gap for the remaining half of 2009. The worst case scenario
of a $10 million drawdown in 2009 would result in an unreserved fund balance of
$114 million or 13% of spending, still above the city's 10% floor. Budget
reduction proposals, which will address both current year and projected fiscal
2010 revenue shortfalls, are scheduled for city council consideration in late
June 2009. Based on flat sales and use tax revenue growth from the reduced base
projected in 2009, the city is facing a significant $60 million budget gap in
2010. Fitch observes that the four-year period of recovery for Denver's sales
and use taxes in the last recession was notable for its length, and that such
vulnerability is again present during the current economic slowdown.

The current offering represents the first installment of the $550 million bond
program authorized by voters in November 2007 along with a 2.5 mill levy
increase for capital maintenance. The bond program is projected to be mill levy
neutral, assuming conservative assessed valuation (AV) growth assumptions. The
2009A bonds include $53 million to refund interim commercial paper, $25 million
in new money, plus $26.5 million in remaining authorization from the city's 1999
zoo improvement bond program. The 2009B bonds will advance refund the city's
series 2000 bonds.

Despite frequent debt issuances, the city's direct debt burden remains moderate;
overall debt levels, including lease obligations and excise tax debt, are
manageable but approaching high at over $5,000 per capita and 3.9% of full
value. The principal pay out rate for GO bonds has been above average but may
trend downward with the current offering, depending on final par amount and
structure.

Notably, Denver is well ahead of most municipalities in regards to the
implementation of GASB 45 which addresses the reporting of other post-employment
benefits (OPEB) liabilities. In addition to reporting its liabilities, the city
has funded its OPEB liabilities on an actuarial basis since 1992, posting a
funded position of 73% for 2006.

Denver's economic diversity benefits from it being the hub of a large 10-county
metropolitan area and the capital of Colorado. Nonetheless, employment in the
area declined for three consecutive years in the last recession. Employment
gains returned in 2004 but are now moderating again due to the ongoing economic
slowdown. The area's unemployment rate totaled a moderate 5.5% in 2008 but has
trended up notably to 9.0% in March 2009. The employment, property, and sale tax
bases are benefiting from ongoing redevelopment throughout the city and
substantial public and private investment in the downtown area, including hotel
construction. However, as in many parts of the country, the city is experiencing
a building downturn after several very active years.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Jose Acosta, 512-215-3726, Austin
Amy S. Doppelt, 415-732-5612, San Francisco
or
Media Relations:
Cindy Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com

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