Fitch Rates $170MM Ohio GO Highway Bonds 'AA+'

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AA+' rating to $170 million State of Ohio general
obligation (GO) bonds as follows:

--GO highway capital improvement bonds series M (full faith and credit/highway
user receipts) (federally taxable - Build America Bonds - direct payment);

--GO highway capital improvement bonds series N (full faith and credit and
credit/highway user receipts) (tax-exempt).

The bonds, which are expected to sell via negotiation on or about April 12,
2010, will be structured at pricing. Fitch also affirms the 'AA+' rating on
approximately $7.1 billion outstanding GO bonds of the state and the 'AA' rating
on $2.5 billion of appropriations-backed debt of the state.

The Rating Outlook is Stable.

On April 5, 2010, Fitch Ratings recalibrated its U.S. public finance credit
ratings for states as well as the District of Columbia, New York City, and the
Commonwealth of Puerto Rico; the above rating(s) reflect this recalibration.
Fitch announced the recalibration in the "Recalibration of U.S. Public Finance
Ratings" special report, which was published on March 25, 2010 and is available
at 'fitchratings.com' under the following headers: Sectors >> Public Finance >>
U.S. Public Finance >> Research. For more detail on the rating adjustments,
please see the March 25, 2010 report. Fitch will revise the remaining
tax-supported ratings along with water and sewer, public power
distribution-only, and public higher education ratings April 30, 2010, as
detailed in the March 25, 2010 report.

RATING RATIONALE:

The GO highway bonds are rated 'AA+' in recognition of the credit
characteristics of the state. In addition to carrying the state's full faith and
credit pledge, the state pledges highway user receipts, which are
constitutionally dedicated to highway purposes.

Despite Ohio's economic breadth and diversity, the disproportionately large
manufacturing sector continues to decline, leading to broader economic weakness
and diminishing prospects for longer-term growth.

--The state's debt burden is moderate and rapidly amortized. Debt is typically
conservatively managed although the budget includes some restructuring for
fiscal relief in 2010/11.

--The state generally has a careful and conservative approach to financial
operations. However, the extended weakness in both the national and local
economies is pressuring state revenues and leading to persistent budget stress.

--The use of one-time revenues including debt restructuring, federal stimulus
funds, and the draw-down of rainy day funds combined with increased state
responsibility for education funding will potentially create a large structural
budget gap going forward.

KEY RATING DRIVERS:

--Rebuilding the budget stabilization fund once the economy begins to recover.

--Continued, steady economic deterioration amid slow transition from
manufacturing dependence or significant economic shock presented by the weakened
national economy.

SECURITY:

General obligation, full faith and credit of the state of Ohio, excluding
lottery proceeds; additionally secured by highway user receipts.

CREDIT SUMMARY:

The GO highway bonds are rated 'AA+' in recognition of the credit
characteristics of the state. In addition to carrying the state's full faith and
credit pledge, the state pledges highway user receipts, which are
constitutionally dedicated to highway purposes. Receipts, predominantly motor
fuel taxes, have been stable in most years, although they declined in fiscal
year 2009 due to the recession. Pledged highway receipts cover debt service on
outstanding bonds, including those now offered, by 13 times (x) in FY 2009.
Although additional borrowing is expected, the structure anticipates a declining
debt service schedule, implying continued strong coverage from existing
revenues. The bonds now offered mature in 15 years.

The current issues are the thirteenth and fourteenth under a voter-approved,
1995 constitutional program to fund transportation improvements. Issuance is
limited to $220 million per year, plus any previously unused authorization; no
more than $1.2 billion of such bonds may be outstanding. Ohio's transportation
program anticipates continued annual issuances well below the $220 million
yearly limit through 2013, with additional new construction funded from state
and federal receipts. In addition to the highway GO bonds, $38 million in
outstanding appropriation bonds for highway-related facilities is supported by
pledged highway user receipts.

Ohio's 'AA+' GO rating reflects the state's careful financial management,
ongoing record of maintaining fiscal balance, and a moderate, rapidly amortizing
debt burden, tempered by a severely weakened economy that remains closely tied
to the troubled manufacturing sector. The current recession has had a widespread
impact on the state's economy, accelerating a longstanding slump in
manufacturing and weighing on the once-growing service sector. State revenue
collections have lagged in the downturn, exacerbated by a multiyear tax cut.
Revenue weakness required multiple rounds of balancing actions in FY 2009,
including exhausting the $1 billion rainy day fund balance. The budget for the
fiscal 2010-2011 biennium relies on one-time revenues to achieve balance. The
plan also expands over several biennia the state's responsibility for education
funding, elevating the risk of structural gaps beyond the current biennium.

State economic performance, already dragged down in this decade by a chronic
decline in the manufacturing sector, has been disproportionately affected in the
current recession. Following the recession of 2001-2002, employment increased a
total of just 0.3% from 2004 to 2007, compared to U.S. growth of 4.7% over the
same period. Job losses are more severe in the current downturn; the state lost
over 289,000 jobs during calendar year 2009. Employment losses are continuing
into 2010, with February 2010 state employment down 3.4% year-over-year,
compared to a 2.5% decline for the U.S. overall. Manufacturing losses,
particularly those tied to automotive sector weakness, have been joined by
service sector losses and the widespread impact of the deep housing market
downturn. Personal income gains have been limited in Ohio in this decade at
approximately 60% of gains nationally, although declines over the past three
quarters have been less than the national and regional averages. The state's
economic forecast assumes employment losses in fiscal 2010 of 4.6%, before a
weak recovery begins.

The state's financial management is sound, with the state consistently
maintaining budgetary balance, including in the current downturn. Over the
course of the fiscal 2008-2009 biennium, the state grappled with revenue
shortfalls totaling approximately $2.7 billion, prompting multiple rounds of
spending cuts, transfers and other measures to maintain fiscal balance. Fiscal
2009 tax receipts fell $951 million, or 5.3% below revised estimates, largely
due to weaker than expected personal income tax collections. As the state's
constitution precludes ending a fiscal year in deficit, spending was reduced
further and the rainy day fund, which had been funded at $1 billion at the start
of the year, was applied to close the gap. The year ended with a fund balance of
$389 million, or 2.3% of tax revenues.

Budget balance in the fiscal 2010-2011 biennium was achieved through the use of
additional one-time and ongoing resources, including $2.4 billion in federal
stimulus and $1 billion in transfers or savings, including $272 million from 10
unpaid employee leave days. The budget also assumed revenues from newly
authorized video lottery terminals (VLTs) which had been expected to contribute
$933 million over the biennium; however, the Ohio Supreme Court ruled that
implementation is subject to a voter referendum, which will not take place until
fall 2010. The suspension of the final phase of the income tax rate reduction is
expected to close the resulting $850 million gap. The budget forecasts ending
the biennium with a $25 million fund balance.

Revenues, which had been on target through December, fell off somewhat in
January and then rebounded again in February. Personal income tax (PIT)
collections are 1.6% below estimate and down 11.8% year-over-year. Continued
strength in sales and cigarette taxes as well as a number of other smaller taxes
offset some of the decline in the PIT. Tax revenues are now just .7% below
forecast year-to-date but down 9% year-over-year. State officials are optimistic
that revenue estimates will be met for the fiscal year.

State debt management is conservative. The enacted budget assumed debt
restructuring to provide $736 million in savings over the fiscal 2010-2011
biennium, with $480 million allocated to the Public Facilities Commission and
$256 million to the Building Authority. Debt amortization is rapid, with all
debt fully retired in 20 years. Total tax-supported debt of $10.9 billion equals
2.7% of 2009 personal income; 69% of GO debt amortizes in 10 years, a high
level, but down slightly due to the previously discussed debt restructuring.
Funding for Ohio's pension systems has declined significantly, with the largest
system, PERS, declining from 96% funded in 2007 to 75% funded as of December
2008. However, market gains over the past year have mitigated some of these
losses.

Considerations for Taxable/Build America Bonds Investors

The following sector credit profile is provided as background for investors new
to the municipal market.

State General Obligation Bonds:

The general obligation full faith and credit pledge is the broadest security a
U.S. state government can provide to the repayment of its long-term borrowing,
and therefore is the best indicator of its overall credit quality. State ratings
generally fall within the two highest rating categories of 'AAA' or 'AA', with a
few outliers. The top tier ratings reflect states' inherent strengths: states
generally have broad economic and tax base resources and all possess sovereign
powers under a federal government system, with substantial, although varying,
control over revenue raising and spending. Given these inherent strengths, in
only a few instances have economic concentration and long-term structural
decline or the inability or unwillingness to address large financial challenges
led to ratings below the 'AA' category. For additional information on State
ratings, see U.S. State Government Tax- Supported Rating Criteria, dated Dec.
28, 2009.

Applicable criteria available on Fitch's website at 'www.fitchratings.com'
include:

--'Tax-Supported Rating Criteria' (Dec. 21, 2009);

--'U.S. State Government Tax-Supported Rating Criteria' (Dec. 28, 2009).

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings, New York
Karen Krop, +1-212-908-0661
Ken Weinstein, +1-212-908-0571
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

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