Fitch Rates Erie County Fiscal Stability Auth's (NY) Sales Tax & State Aid Secured Bonds 'AA'

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AA' rating to the following Erie County Fiscal
Stability Authority (the authority) NY sales tax and state aid secured bonds:

--$157.795 million series 2010 A.

The Rating Outlook is Stable.

Fitch will recalibrate the ratings on the above referenced bonds on April 30,
2010 as described in the March 25, 2010 report 'Recalibration of U.S. Public
Finance Ratings', available at 'www.fitchratings.com'. At that time the ratings
will be revised as follows:

--The rating on the sales tax and state aid secured bonds will be revised to
'AA+' with a Stable Outlook.

The bonds are expected to sell via negotiation on May 6, 2010.

RATING RATIONALE:

--The authority is a bankruptcy-remote, statutorily defined issuer.

--There is a tight legal framework with first perfected security interest.

--The state and county are able to alter the tax structure unilaterally,
although this is somewhat mitigated by non-impairment clauses.

--Debt service coverage levels are strong.

--The New York State Department of Taxation and Finance serves as the collection
agent.

--There is a statutorily defined minimum debt service coverage and maximum
outstanding debt limits.

--The pledged sales tax revenue stream is economically sensitive and derived
from a below-average economic base.

KEY RATING DRIVER:

--Continued strong coverage of debt service by pledged revenues.

SECURITY:

The bonds are secured by a pledge of the authority's right title and interest in
the county's local sales tax revenues, state aid revenues paid to the authority,
and other aid, rents, fees and charges of the authority.

CREDIT SUMMARY:

Pursuant to the Erie County Fiscal Stability Authority Act (the ECFSA Act), the
authority was created in 2005 to provide a debt funding vehicle for Erie County
(rated 'BBB+' by Fitch) as well as to provide financial control and oversight
functions. The authority receives the county's share of sales and compensating
use taxes authorized by the state and imposed by the county as well as state aid
appropriated by the state. The authority's long-term bond structure grants a
first perfected security interest in sales tax revenues as well as state aid.
Although the county has received only a nominal amount of state aid revenues in
recent years, sales tax revenues provide strong debt service coverage on maximum
authority authorized issuance, excluding authority issues to refund outstanding
general obligation bonds of the county, even under stress test scenarios.
Furthermore, despite the county's below-average economic indicators and
declining population, unemployment levels remain below those of the state and
nation, and the county continues to experience development which has expanded
the tax base. Pledged revenue growth has been steady, providing strong
bondholder protections. Fitch's primary credit concern is the right of the state
and county to alter the tax structure; however, this risk is somewhat mitigated
by non-impairment covenants of both entities.

Debt issued by the authority as authorized by the ECFSA Act is secured by the
county's portions of the local sales tax (currently 4.75%) and state aid. The
state and county have covenanted not to impair bondholder rights as long as
authority debt is outstanding; specifically, the county covenants to maintain a
local sales tax rate of at least 3% through 2039 when the authority will be
disbanded. Additionally, any change in the local tax law cannot result in
coverage below 2 times (x) maximum annual debt service (MADS) on authority bonds
and notes from county sales tax revenues. The bond indenture will require that
the authority assign its rights, title and interest in the pledged revenues to a
trustee and will direct that the state transfer such revenues directly to the
trustee. The New York State Department of Taxation and Finance serves as the
collection agent. Revenues will be transferred to the county for operations only
after debt service on the authority's obligations is paid.

The current bond issue is the authority's first long-term debt issuance, and
proceeds will be used to retire its outstanding bond anticipation notes maturing
May 19, 2010 and to purchase county bonds to provide payment for new county
capital projects. Stress tests show that pledged revenues provide very strong
coverage. Pursuant to the ECFSA Act, the amount of senior lien bonds outstanding
is limited to $700 million, excluding authority issues to refund outstanding
general obligation bonds of the county, and cash flow notes to $250 million.
Coverage of pro forma MADS by 2009 pledged revenues for the maximum $700 million
issuance allowable is strong at 8.4x. Coverage based solely on the 3% portion of
the sales tax required to be levied by the county through 2039 equals 3.2x. The
additional bonds test for senior debt is strong, requiring 3x coverage of MADS
from sales tax revenues alone.

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

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

--'U.S. Local Government Tax-Supported Rating Criteria', dated Dec.21, 2009.

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

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PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE '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
Ann G. Flynn, 212-908-9152
Amy Laskey, 212-908-0568
or
Media Relations:
Cindy Stoller, 212-908-0526
Email: cindy.stoller@fitchratings.com

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