Fitch Affirms Detroit Downtown Dev Auth, MI $116.1MM TIF Bonds at 'BBB'; Outlook to Negative

NEW YORK--(Business Wire)--
Fitch Ratings affirms the following Detroit Downtown Development Authority,
Michigan bonds at 'BBB':

--Tax increment refunding bonds (Development Area No. 1 Projects) series 1998A;

--Tax increment bonds (Development Area No. 1 Projects) series 1998B (taxable);

--Tax increment bonds (Development Area No. 1 Projects) series 1998C (junior
lien).

The Rating Outlook is revised to Negative from Stable.

The Negative Outlook reflects the possibility that debt service coverage will
weaken from currently satisfactory levels as a result of tax base declines.
Pledged revenue is expected to decrease by 3% in fiscal 2010 given a drop in
overall property values, and Fitch believes it is likely that General Motors's
(GM) plan to appeal its property assessments nationwide will accelerate
near-term tax base decline. GM's headquarters makes up 18% of the tax base
within the project area from which pledged revenues are derived. The rating also
reflects the project area's tax base concentration, with the ten largest
taxpayers making up 50% of assessed value.

The bonds are secured by a pledge of all tax increment (TIF) revenues captured
by Development Area No. 1 within the Downtown Development District. Downtown
Development Authority (DDA) was formed in 1976 to promote economic development
downtown. Development Area No. 1 is comprised of 615 acres and is roughly
coterminous with the downtown business district.

In addition to the GM-owned Renaissance Center, it includes two casinos,
stadiums for the Detroit Lions and Detroit Tigers, and development along the
city's waterfront. The area includes about 8% of the city of Detroit's total
taxable value. The authority receives tax increment revenue from the school
district levy but can only use these funds for debt service on the 1996 bonds,
which mature in 2010. Based on figures provided by the authority, Fitch believes
that debt service coverage from pledged TIF revenue will remain fairly constant
once the series 1996 bonds mature, as debt service declines proportionately to
the drop in TIF revenue.

To date coverage from pledged revenue has been satisfactory. TIF revenue has
been somewhat volatile, including a sizable decline in fiscal 2008 to reflect
repayment of taxes that had mistakenly been remitted in several prior years from
Renaissance Zone projects that were exempt from taxation. Despite adequate
coverage levels to date, Fitch believes GM's appeal along with the weakened
outlook for the U.S. auto industry will limit the area's potential for growth,
and could drive further property value reductions. Nonetheless, debt service
coverage holds up adequately to Fitch-designed stress scenarios. For example, if
the captured value continues to decline at the expected fiscal 2010 3% annual
rate, coverage remains above 1 time (x) through the life of the bonds. However,
if revenues declined 4% annually, coverage would be insufficient in some years
and the debt service reserve fund's availability to cover these shortfalls is
unclear given that it is funded by a surety provided by MBIA.

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
Amy R. Laskey, +1-212-908-0568
Dora Lee, +1-212-908-0315
Media Relations
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

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