Fitch Affirms Bay City, Michigan's LTGOs at 'A+'; Outlook Stable

NEW YORK--(Business Wire)--
In the course of routine surveillance, Fitch Ratings affirms the 'A+' rating on
Bay City, Michigan's (the city) approximately $20.1 million in limited tax
general obligation bonds (LTGOs). The Rating Outlook is Stable.

The 'A+' rating reflects the city's conservative financial management resulting
in strong general fund reserve levels and tax levy flexibility under the
operating millage cap, and a moderate debt burden with limited additional
borrowing plans and rapid principal amortization. The rating also considers the
local economy's high unemployment and exposure to General Motors, the largest
taxpayer within the city, which filed for protection under Chapter 11 of the
bankruptcy code on June 1, 2009.

Bay City, with an estimated population of 34,501, is the county seat of Bay
County and is located along the Saginaw River. Effects of the current economic
downturn have been felt in Bay City despite a relatively diverse employment base
anchored by Bay Regional Medical Center and a variety of government entities.
Unemployment reached 12.3% in April 2009, up from 7.1% a year prior. Median
household income measures approximately 89% of the state average. The local
housing market is holding up reasonably well, with foreclosure rates lower than
the national average, however, delinquency rates and subprime exposure are
higher than the national average which could portend future financial pressure.

General Motors Powertrain plant, which makes engine and transmission parts, is
the city's largest single taxpayer, accounting for approximately $1 million in
annual property tax revenue or 4.5% of the city's total spending. The plant also
employs over 600 people or 4% of the city's total employment base. In addition,
General Motors has filed a property tax appeal seeking a 90% reduction in
taxable value. Fitch notes the city maintains a degree of revenue raising
flexibility under its operating millage cap, which if utilized would generate
approximately $700,000 in additional property tax revenue based on current
taxable valuation. The city has estimated a worst-case loss of approximately
$360,000 in tax revenues and has set aside funds to cover the potential lost
revenue. In addition, the city's tax base has remained fairly stable. While the
total ad valorem State Equalized Value (SEV) declined nearly 5% in fiscal 2010,
taxable value (TV), on which property taxes are levied, remained relatively flat
and is expected to remain flat though fiscal 2011.

The city has mitigated declining state aid revenue with strong financial
controls and demonstrated commitment to maintaining adequate reserves. Despite
declines in state-shared revenues, the city has consistently recorded an
unreserved general fund balance above 20% of expenditures, exceeding its target
of 15% of expenditures. The fiscal 2008 total general fund balance was roughly
$4.8 million (22% of spending), a slight decline from fiscal 2007. According to
the city, the general fund will break even or generate a small surplus at the
close of fiscal 2009. The fiscal 2010 budget appropriates approximately $700,000
in fund balance for various pay-go capital spending. Reductions in state aid
were offset by various spending cuts. The budget also includes a contingency of
approximately $100,000.

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, New York
Lindsay Trzaska, +1-212-908-0239
Michael Rinaldi, +1-212-908-1833
Cindy Stoller, +1-212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com

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