Fitch Rates Lynchburg, Virginia's $54MM GOs 'AA'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AA' rating to the City of Lynchburg (the city),
Virginia's approximately $53.7 million general obligation (GO) public
improvement bonds, consisting of $46.1 million GO public improvements bonds,
series 2009A and $7.6 million GO public improvement refunding bonds, series
2009B. The bonds are scheduled to sell on July 21, with bond proceeds funding
various general government projects and redeeming certain outstanding GO bonds.
Fitch also affirms the 'AA' rating on the city's approximately $169 million of
outstanding GO bonds. The Rating Outlook is Stable.

The 'AA' rating reflects the City of Lynchburg's strong financial management,
moderate debt levels, and mature economy. The traditional employment
concentration in the manufacturing sector has been diffused by the city's role
as a retail, health care, and education center for the surrounding area. Future
debt needs are manageable, and the debt burden should remain moderate given the
rapid amortization of outstanding bonds and the availability of user fees to
support a portion of the city's GO bonds.

Located in central Virginia, Lynchburg has effectively dealt with many of the
challenges that face historically manufacturing-based economies. Economic
diversification emphasizing engineering, education, and health care continues,
while significant public and private investment has bolstered development of the
city's downtown and riverfront. Liberty University, one of the 10 largest
employers, is completing significant capital expansion projects and expects to
more than double its current student enrollment of 11,300 by 2020. The nuclear
engineering firm Areva NP North America announced a $25 million capital
investment and the anticipated addition of 500 employees by 2011 arising from
its role in a commercial nuclear reactor construction consortium. The 7.8% April
2009 unemployment rate remains above the Commonwealth's 6.6% but below the
nation's 8.6%. Per capita money income levels, while below average at 69% of the
Commonwealth and 80% of the national figures, are somewhat reflective of the
city's significant student population.

Financial management is strong, as evidenced by adherence to formalized policies
regarding fund balance, debt affordability, quarterly reporting, and midyear
budget reviews. Reserve levels consistently exceed the adopted policy target of
undesignated fund balance equal to at least 10% of general fund revenues. The
city ended fiscal 2008 with an unreserved general fund balance equal to 20.2% of
spending, a measure more commonly employed by Fitch. Hiring freezes, a
two-and-a-half day furlough, and departmental reductions were implemented in
fiscal 2009 in response to projected revenue declines and the city anticipates a
general fund balance reduction of $7.6 million, inclusive of $5.9 million of
pay-as-you-go capital financing. Projected fiscal 2009 year-end results as well
as the fiscal 2010 budget are expected to adhere to city reserve policies. City
enterprise funds are healthy, aided by steady rate increases. However, the city
remains under a special consent order to separate its storm water and sanitary
sewer systems, and future sewer utility rate increases are envisioned, keeping
them above average for the area.

Overall debt levels are moderately low at $2,127 per capita and 2.9% of taxable
assessed value; outstanding debt amortizes at an above-average 62.8% within 10
years. Capital needs outside of the sewer system upgrades are modest due to the
low rate of population growth and the presence of an established infrastructure.
The $178 million fiscal 2010-2014 capital improvement plan (CIP) represents a
decrease from previous plans due to the deferment of a large school
reconstruction project. About one-half of the CIP relates to the sewer system,
which includes compliance with the special consent order regarding combined
sewer overflows. GO bonds, revenue bonds, and combined pay-as-you-go capital
financing and intergovernmental grants each provide about one-third of CIP
funding.

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
Barbara Ruth Rosenberg, 212-908-0731
Alexandra Knight, 212-908-9181
Media Relations:
Cindy Stoller, 212-908-0526
cindy.stoller@fitchratings.com

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