Fitch U.S. Muni Surveillance: Toledo, OH's Sewer Revs Affirmed at 'A+'

AUSTIN, Texas--(Business Wire)--
In the course of routine surveillance, Fitch Ratings affirms the 'A+' rating on
Toledo, Ohio's (the city) $36.5 million of outstanding senior lien sewer revenue
bonds. The bonds are payable from a senior lien on and pledge of the net
revenues of the city's sewer system (the system). The Rating Outlook is Stable.

The 'A+' rating reflects the system's strong financial performance in terms of
debt service coverage and liquidity and above average debt amortization. The
rating also reflects a sizeable capital plan due to consent decree requirements,
limited rate flexibility, and high leverage ratios. The system faces regulatory
challenges which are expected to lead to significant additional leveraging.
However, financial performance is expected to remain strong given the proposed
rate hikes.

Since 2002, the city has negotiated with the EPA about mandated improvements
related to combined sewer overflows. To date, the city has completed the first
phase of its consent decree requirements. The consent decree between the city
and environmental authorities requires some significant capital expenditures.
The city's fiscal 2009-2013 capital improvement plan (CIP) totals $223.3
million, up 16% from fiscal 2005 estimates. Approximately 93% of the capital
plan is forecasted to be debt-funded -- including state loans -- with the
remainder to be funded with cash. Leverage ratios are high, with total
outstanding long-term debt per customer at $2,056 for fiscal 2007 versus the 'A'
category median of $1,875. Projected debt per customer over the next five years
is expected to remain above the 'A' medians.

The financial performance of the city's sewer system has been strong. Senior
annual debt service coverage (ADS) was 4.3 times (x) in fiscal 2007. Projected
debt service coverage is expected to produce similar results. Liquidity for
fiscal 2007 was also strong at 527 days cash on hand. Days working capital was
similar, averaging 502 days over the past five years. Given that approximately
20% of the CIP will be funded with cash, liquidity should remain strong over the
next five years. Based on the current rate structure, the average monthly sewer
bill equals 1.2% of the city's median household income (MHI), which is slightly
above Fitch's affordability threshold. However, given water rates are very low
at 0.5% of MHI, the combined utility bill is within affordability levels, giving
the city some rate flexibility.

Serving a population of about 346,000 in the city and the immediate vicinity,
the system benefits from a fairly diverse economic area and stable demand.
Toledo is the county seat of Lucas County, located in northwestern Ohio. The
city's economy is driven by manufacturing, health care, education and local
government. The unemployment rate, measured at a high 14.3% in May 2009, is
above county, state and national levels. Despite the rising unemployment,
delinquency rates remain reasonable at around 1.4% in fiscal 2008. Per capita
personal income levels in the city are 75% and 70% of state and national
averages, respectively.

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
Julie Seebach, +1-512-215-3740 (Austin)
Melanie A.J. Shaker, +1-312-368-3143 (Chicago)
Cindy Stoller, +1-212-908-0526
(Media Relations, New York)
cindy.stoller@fitchratings.com

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