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Summary: Hoover, AL; General Obligation, Local GO Credit Analyst: James Breeding, Dallas [PHONE REDACTED]; Peter V Murphy, New York [PHONE REDACTED] Table Of Contents Rationale Outlook December 6, 1999 www.standardandpoors.com/ratingsdirect 1 133971 I 301279465 ---PAGE BREAK--- Summary: Hoover, AL; General Obligation, Local GO Credit Profile $25.5 mil muni debt muni issue ser 1999B due 2015 AA- Sale date: 09-DEC-1999 AFFIRMED $86.328 mil. Hoover AA- OUTLOOK: STABLE Rationale The rating on Hoover, Ala.'s GO bonds is based on the full faith and credit of the city. The rating reflects: • The city's location in the Birmingham, Ala. MSA; • Solid economic and tax base growth; and • Good financial performance. These are partially offset by on-going growth pressures and high overall debt. Hoover is a rapidly growing community outside of Birmingham, hosting a mix of employers in services, utilities, retail, finance, construction, and insurance. Subsequently, unemployment has been historically stable and low. Wealth and income levels are strong with median household effective buying income at 159% of the national average. Hoover remains the retail hub of the state with a strong and growing retail base as evidenced by per capita retail sales at more than 200% of U.S. averages and total sales of more than $1.3 billion in fiscal 1998. Continued growth is attributed to Riverchase Galleria, the state's largest mall, which serves an estimated 12 million customers annually, as well as other retail centers on U.S. Highways 280 and 31 and State Highway 150. Tax base growth has experienced good growth of more than 30% in the past five years, reaching a market value of more than $4.3 billion in fiscal 1999. Financial performance is sound with fiscal 1998 ending with a general fund operating surplus of $5.2 million despite more than $11 million in transfers to accommodate operating deficiencies in the city's Library, board of education, and park and recreation component units. The unreserved general fund balance has increased 144% from fiscal 1996 to $17.9 million or 49% of general fund expenditures at fiscal 1998 year end. Unaudited 1999 results indicate an increase in fund balance of $4 million. Hoover's revenue stream, however, is highly dependent on sales and use taxes for nearly 65% of its total revenues while business licenses and property taxes account for 9% and 8% of revenues, respectively. Overall net debt is very high at $4,022 per capita, although moderate at 5.5% of market value. The city plans to issue additional revenue bonds as part of its ongoing sewer upgrade program and another $15 million for a municipal complex in the next few years. Standard & Poors I RatingsDirect on the Global Credit Portal I December 6, 1999 2 133971 I 301279465 ---PAGE BREAK--- Outlook The outlook reflects the expectation of continued growth in the sales tax base coupled with large general fund balances, which mitigates the risk inherent in its dependence on sales tax revenues. www.standardandpoors.com/ratingsdirect 3 133971 I 301279465 Summary: Hoover, AL; General Obligation, Local GO ---PAGE BREAK--- S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. 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