Fitch Rates Laredo, Texas' $30MM COs & Contract Obligs 'AA-'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings assigns its 'AA-' rating to Laredo, TX's $25.5 million combination
tax and revenue certificates of obligation (COs), series 2009A, and $5.2 million
public property finance contractual obligations, series 2009, scheduled to sell
the week of Aug. 3, 2009 via negotiation. Additionally, Fitch affirms its rating
on the city's outstanding debt as described below:

--$61.5 million general obligation (GO) bonds at 'AA-';

--$199.5 million COs at 'AA-';

--$34 million sports venue sales tax revenue bonds at 'A+'.

The Rating Outlook for all the bonds is Stable.

The 'AA-' rating reflects Laredo's sustained financial stability, growing
economic base, and moderate debt levels. Also incorporated in the rating is the
area's low wealth levels, ongoing capital pressures associated with rapid
population gains, and economic reliance on Mexico. The city has benefited from
historically sound financial management and diverse general fund revenue
streams. Notably, the city's previous 15% fund balance policy was elevated by
voters to a city charter requirement in 2007. Until recently, the city was
posting record-low unemployment levels despite rapid labor force growth. Sales
tax receipts and international toll bridge revenues have also softened, due in
part to the weakened Mexican peso, but the city is undertaking satisfactory
budgetary actions to maintain structural balance. Despite these challenges,
Global Insight projects the Laredo metropolitan statistical area (MSA) to
sustain the value of its real gross product this year unlike most MSA's whose
economies are projected to contract.

Laredo's population continues to grow rapidly, with 2009's estimated population
of 242,800 up nearly 38% over 2000 census levels. The population of its sister
city in Mexico, Nuevo Laredo, is estimated at 300,000. As the nation's largest
inland port, Laredo's international trade activity continues to fuel strong
growth in its property tax base, which has increased by a compound annual
average of 11% over the last five years. Taxable assessed valuation (TAV) growth
is expected to moderate somewhat in the near term due to declining residential
building permits. Recent commercial permit activity included several high-value
retail developments although most of them have been delayed due to the national
recession.

Aided by substantial enterprise fund support, Laredo's direct debt burden,
including outstanding sales tax bonds, remains modest at $801 per capita and
1.9% of TAV. The overall debt burden is manageable at $2,251 per capita and 5.3%
of TAV after adjusting local school district debt for substantial state support.
Principal pay out is modestly above average. The city's 2008-2012 capital
improvement plan (CIP) is large at $861 million but includes GO and sales tax
debt financing for only about 27% ($234 million) of the total CIP. The majority
of the other funding sources are comprised of state and federal grants. The city
will issue $52 million in utility supported COs next month for improvements to
its water and sewer systems.

The city's financial performance has improved as evidenced by annual general
fund surpluses in each of the last five fiscal years. Most recently, the city
posted a $3.5 million surplus in fiscal 2008, despite sales tax growth (2%) that
fell well below the aggressive budgeted rate of 8%. Fiscal 2008's unreserved
undesignated fund balance totaled a strong $25.3 million or 20.2% of spending,
above the city's new 15% fund balance city charter requirement. Cooling economic
conditions have led fiscal 2009 sales tax growth to slow further, with year-end
receipts projected to decline by 3.2% versus the budgeted rate of a 2.2%
increase. Bridge traffic is also down for the same period, resulting in a $3.1
million budget gap for the general fund. In response, the city has imposed
budgetary reductions and still expects to post balanced operating results for
fiscal 2009. Notably, the fiscal 2010 budget is balanced, based on a modest 1%
growth projection in sales tax receipts, and continued declines in international
toll bridge transfers.

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
Jose Acosta, +1-512 215-3726 (Austin)
Dora Lee, +1-212-908-0967 (New York)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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