Fitch Rates Normal, Illinois' $16.1MM GOs 'AA+'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AA+' rating to the following unlimited tax general
obligation (ULTGO) bonds for the Town of Normal, Illinois (the town):

--$10.16 million GO refunding bonds, series 2009;

--$5.9 million taxable GO bonds (Build America Bonds - Direct Pay), series
2009A.

The bonds are scheduled for negotiated sale on or about July 16, 2009 and are
secured by an ULTGO pledge by the town. Proceeds from the series 2009 bonds will
refund outstanding series 2003 variable rate ULTGO bonds, while the series 2009A
will finance capital improvements pertaining to the town's Uptown Project. In
addition, Fitch affirms the 'AA+' rating on approximately $64.5 million in
outstanding ULTGO bonds. The Rating Outlook is Stable.

The 'AA+' rating reflects the town's proactive financial planning, sizable
general fund balances, stable local economy, and growing tax base. Debt ratios
are above average, although the town pays its debt from non-property tax
revenues. While the local economy has demonstrated resiliency, the town is not
completely immune from the effects of the ongoing recession. Lower than budgeted
collections of economically sensitive revenues are projected to result in
drawdowns of fund balance in fiscal 2009 and 2010. However, strong budgetary
oversight is expected to result in the maintenance of still adequate reserve
levels.

The town's conservative budgeting practices have resulted in consistently high
unreserved fund balance levels ranging from 25% to 35% since 2001. In fiscal
2008, the town generated a $970,000 surplus resulting in an increase in
unreserved fund balance to 28.5% of spending, up from 26.9% in fiscal 2007
compared to a budgeted draw of $1.2 million. Preliminary fiscal 2009 results
benefit from a one-time accrual change showing a slight $749,000 drop in fund
balance to 26.8% of spending. Although the town is budgeting for another $1.3
million draw for fiscal 2010, fund balances remain favorable, and management has
shown a willingness to raise revenues and reduce spending. Additionally,
historical financial results have outperformed budget.

The town depends heavily on local and state sales taxes, state shared income
taxes, utility taxes, and property taxes. Sales taxes, both local and state,
along with shared income taxes represent 46% of general operating revenues. The
town has revised its revenue projections to reflect a 4.1% and 3.3% decline for
local and state sales tax revenue for fiscal 2010, respectively. In addition, a
15.5% decline in state shared income tax is now projected. However, year-to-date
receipts have performed better than projections. Management has been proactive
in tracking revenue performance and revising its revenue forecasts and making
expenditure cuts accordingly.

Located in McLean County in the heart of central Illinois, Normal's local
economy is anchored by State Farm Insurance headquartered in neighboring
Bloomington and four universities, the largest being Illinois State University
(with a student population estimated at 20,104 for Fall 2008). Although
unemployment did increase slightly to 5.3% from 4.7% from May 2009 to 2008, it
remains significantly lower than regional, state, and national averages. The
town's tax base continues to grow, albeit slowly, reflecting a relatively
healthy housing market as well as ongoing commercial development.

The Uptown Project is a major investment in the town's historic downtown area
and the most significant capital project in the past decade. The plan consists
of a hotel and conference center, multi-modal transportation center, and
substantial roadway and infrastructure improvements to accommodate the new
facilities. The largest component is a hotel and conference center, which is
scheduled to open in September 2009. Also incorporated in the plan is a parking
garage to accommodate existing traffic and future needs; a mixed-use development
which incorporates condos, office and retail space; and a multi-modal
transportation center, most of which is to be funded using federal and state
grants. While the hotel and conference center are nearly complete, the
transportation center will not proceed until federal monies are in place and is
likely to be the last significant portion of the project.

The town's direct debt burden with this issue is equal to an above average
$1,521 on a per capita basis and 3.5% of property market values. Overlapping
debt, consisting mostly of school district debt, raises the overall debt burden
to an above average $3,662 per capita and a high 8.4% of property market values.
The town expects to use local sales tax revenue to fund debt service. In
addition, the town's water/sewer system pays for a portion of its GO debt. With
this refunding, the town will no longer have any outstanding variable-rate debt.
Future borrowing plans appear to be manageable.

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
Dora Lee +1-212-908-0341 (New York)
Mark Campa, +1-512-215-3727 (Austin)
Melanie A.J. Shaker, +1-312-368-3143 (Chicago)
Media Relations
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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