Fitch Rates EGR AA

May 5, 2005
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CHICAGO — The city of East Grand Rapids yesterday was assigned an AA+ rating by Fitch Ratings for its $3.2 million 2005 Michigan Transportation Fund bonds.

The bonds are scheduled to sell competitively on Wednesday with Robert W. Baird & Co. serving as financial adviser. Secured by state-collected gas and weight taxes returned to the city for highway and road purposes with an additional full-faith tax and credit pledge, bond proceeds will finance improvements to the major street system in Gaslight Village as well as streetscaping projects within the city.

Additionally, Fitch affirmed the AA+ rating on the city's $10.4 million of outstanding general obligation, unlimited tax bonds.

According to Fitch, the rating is based on the city's high wealth and income, strong financial flexibility, and steadily growing tax base, along with a policy of financing capital needs through operating sources that limits direct debt levels.

With a population of 10,764, the city's per capita income levels are 189 percent of the national average and it claims the highest average property values in Kent County — rated AAA. Although the city spans just 3.4 square miles, property values in the past seven years have increased 7.4 percent annually. Residences account for 95 percent of the tax base.

In the past six years, the city's general fund balance has declined slightly to $2 million.

While the general fund typically generates an operating surplus, capital transfers have resulted in small shortfalls in the past two years. Despite losses in state-shared revenue, the city still contributed $700,000 to $1.2 million each year to its streets funds. Healthy undesignated general fund balances have remained above 12 percent of spending in each of the past six years.

The city's moderate direct debt with this issue totals $1,260 on a per-capita basis and just 1.2 percent of property values, according to Fitch. Total debt, mostly related to schools, equals $6,534 on a per-capita basis and 6.2 percent of property values. Additional debt issuance in the near term is unlikely as the city has addressed its major capital needs, the ratings service stated.    

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