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New Issue: MOODY'S ASSIGNS Aa3 RATING TO THE CITY OF HOOVER'S (AL) $77.12 MILLION GENERAL OBLIGATION WARRANTS AND $4.13 TAXABLE GENERAL OBLIGATION REFUNDING WARRANTS Global Credit Research - 15 Nov 2002 Aa3 RATING AFFECTS $51.22 MILLION IN PREVIOUSLY ISSUED DEBT Municipality AL Moody's Rating ISSUE RATING General Obligation Warrants, Series 2002 Aa3 Sale Amount $77,120,000 Expected Sale Date 11/24/02 Rating Description General Obligation Warrants Series 2002 Taxable General Obligation Warrants, Series 2002 Aa3 Sale Amount $4,130,000 Expected Sale Date 11/24/02 Rating Description Taxable General Obligation Warrants Opinion NEW YORK, Nov 15, 2002 Moody's Investors Service assigns an Aa3 rating and stable outlook to the City of Hoover's General Obligation Warrants, Series 2002. The rating reflects the high wealth levels of the City, the rapid growth of the region, and solid fiscal policies which have created substantial reserves. Hoover has continued to grow in population and tax-base through selective annexation, designed to contribute positively to the city's finances. HOOVER ECONOMY AND WEALTH LEVELS EXPANDING WITH GROWTH IN BIRMINGHAM-HOOVER MSA The City of Hoover straddles Jefferson (GO-LT Aa3)and Shelby Counties (NR), and is a major residential and retail hub within the rapidly growing Birmingham-Hoover Metropolitan Statistical Area. The Birmingham-Hoover MSA recently passed 1 million residents to become the 53rd largest such area in the US. Median family income of $79,912 is nearly double the Alabama (Aa3) level, and 35.5% of City households earned more than $100,000 in 2000. The City serves as a suburban base for higher income commuters to Birmingham (GO-LT Aa3), but also has its own diverse employment base which includes BlueCross/Blue Shield of Alabama, AmSouth Bank (A2), and Accenture in addition to a large retail base. Hoover's extremely low unemployment rate of 1.8% has stayed well below state and national levels throughout the recent economic slowdown, and will be enhanced in 2003-4 by the expected addition of 3,000 higher paying jobs in an AmSouth building nearing completion. The City is home to a plethora of retail outlets, most notably the high-end Riverchase Galleria, but continues to add new stores, including Best Buy, Kohl's, WalMart, AutoMax and Publix, along its Route 280, 150 and 31 corridors. Hoover, home to a number of highly-rated golf courses, currently hosts one PGA Tournament each year and will seek another for the new course being constructed in its Shannon Valley development. Portions of the proceeds from this issue will assist in developing the property by adding roads and a conference center to the planned residential and commercial development. The Shannon Valley area is the most recent (2002) of several annexations that have increased the size and economic base of the city. The City has expanded eastwards along the Route 280 corridor, and has there another planned multi-use development, Tattersall Park. City officials do not foresee any further large annexations, and will add new areas only if they are accretive to city finances. Approximately 30% of the City's land remains undeveloped, which will allow for further growth over the next decade. ---PAGE BREAK--- STRONG FINANCIAL POSITION EXEMPLIFIED BY SOLID RESERVES Hoover's financial position continues to improve, driven by increasing sales tax receipts, growing taxable base, and prudent budgeting. While the City relies mainly on sales taxes of $43.7 million in 2002 (unaudited) or 64% of the budget, they have proven to be a stable source of funding, showing sustained growth through the current national economic malaise. Due to the addition of two new WalMart Superstores and other retail establishments, City officials have aggressively budgeted for a 10% increase in this source of funds for fiscal 2003, well above the average growth of 3.1% over the past five years. For FY2002, actual sales tax receipts came in about 2% over budget, indicating that historical growth estimates have been accurate. This surplus, combined with stringent cost controls, allowed the City to increase its General Fund Balance by $2.6 million in FY2002 to $23.8 million, or 33.7% of annual revenues. Fund balance had to be restated downwards in 2001 to reflect the reclassification of a receivable and a restatement of capital expenditures. To better manage finances, City officials have created their first five year Capital Projects Fund, and they anticipate a healthy fund balance to be maintained in this Fund as well. City officials are targeting to keep the General Fund balance at around 30% of revenues going forward, and the undesignated portion in FY 2001 was $20.1M, or 95% of the total General Fund Balance. Moody's expects that the inception of a capital projects plan, continued attention to cost-saving measures, and sustainable revenue growth will allow Hoover to maintain its strong financial position. MODERATE DEBT LEVELS AND SLOWER AMORTIZATION RATES MITIGATED BY NO FUTURE BORROWING PLANS Hoover's overall debt levels, including large borrowing by the Hoover BOE (Special Tax A1), are moderately high at 5.2% of full valuation in 2002. The City will amortize its existing debt at a below average rate, with only 40% retired in 10 years. City officials, however, project no new borrowing through 2007, which will lower overall debt ratios in coming years. The proceeds of the current offering will be partially used for refunding $35.5 million of non-taxable General Obligation Refunding Warrants, Series 1993, and $3.8 million of taxable General Obligations Warrants, Series 1993, for a net present value savings of $1.65 million or 3.8% of refunded principal. While maturities have not been extended past the original issues, these savings will be realized in the first few years. Of the remainder of the issue, $12 million will be used for roads and a conference center in the Shannon Valley development, $25 million funds a new municipal complex including a new 64 bed jail facility, and $3 million is slated for road projects and fire stations. Moody's expects that the stated intent to offer no new debt issues over the next five years will allow Hoover to easily manage its current debt position and maintain high General Fund Balances. KEY STATISTICS 2000 Population: 62,742 Full Valuation: $6.94 billion Debt Burden: 5.2% Amortization of Principal (10 Years): 39.9% FY 2002 General Fund Balance (Unaudited): $23.784 million FY 2002 General Fund Balance as a % of Revenues (Unaudited): 33.7% Full Value Per Capita: $97,612 Median Family Income(1999): $79,912 MFI County/MFI State (1999): 192% Per Capita Income (1999): $33,361 PCI County/PCI State (1999): 183.4% Unemployment Rate (August 2002): 1.8% ---PAGE BREAK--- Brian Kennedy Analyst Public Finance Group Moody's Investors Service Bill Leech Backup Analyst Public Finance Group Moody's Investors Service Contacts Journalists: (212) 553-0376 Research Clients: (212) 553-1653 © 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. 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