Fitch Rates St. Paul Port Authority -Minnesota- $141.06MM Lease Revs 'AA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 16, 2003

Fitch rates 'AA' the Port Authority of the City of Saint Paul's (the Authority) $59.415 million lease revenue bonds, series 2003-11 (State of Minnesota Office Building at Robert Street Site) and $81.645 million lease revenue

bonds, series 2003-12 (State of Minnesota Office Building at the Cedar Street Site) expected Oct. 22 through negotiation with syndicate led by RBC Dain Rauscher, Inc. In addition, the 'AA' ratings assigned to outstanding series 2002-09 and 2002-10 are affirmed by Fitch. The bonds are payable from payments made under separate leases by the State of Minnesota, subject to biennial legislative appropriations. Details of bond structure are yet to be determined.

Lease rental payments by the State of Minnesota, acting through its Commissioner of Administration, subject to annual legislative appropriations, are the source of payments for the Authority bond issues. Proceeds of these issues and $54.86 million bonds sold in 2002, will fund construction of two office buildings, one with a parking ramp, to provide what will serve as the primary offices of three major state agencies in the capitol area. The projects have been authorized by the legislature, in conjunction with a general obligation authorization to develop a related laboratory facility adjacent to one of the buildings and are consistent with a comprehensive plan for locating state agencies as well as the capitol area master plan. The office buildings are separate projects with separate indentures, lease agreements and appropriations, although the payment source is the same, the state's general fund. The provisions in the documents are also nearly the same. Lease purchase financing, and not general obligation bonding, is being undertaken because of legislative general obligation debt limits.

The projects are large in scope, a total of $195.9 million currently planned, and rental payments do not commence until project completion. Debt service is being provided from capitalized interest until such time; the state and the Authority covenant to issue additional bonds to fund additional project costs and additional capitalized interest as required. The trustee's security interest in the land and projects could be compromised in the event of non-appropriation triggering lease and subsequently, ground lease termination, unless the Authority or trustee exercised their purchase options on the land within 180 days. However, this provision stems from technical considerations because the land was purchased by the state through a general obligation bond issue and can not be subordinated to a mortgage, and is very unlikely to occur. The broad based executive and legislative branch involvement and planning of the project and this financing, the importance of the project to the state and their location in the capitol area support the 'AA' rating.

Minnesota's general obligation bonds are rated 'AAA' by Fitch. Its superior credit standing reflects several factors. Debt structure is excellent, with nearly all debt represented by general obligations, amortized rapidly, and a notable restraint as to the use of credit extension. By policy, the burden of debt on resources is low, currently about 2% of personal income, and that policy is expected to be continued. Economic growth was very strong, allowing favorable financial operations and the accumulation of large balances as well as considerable tax relief. With the slowing of growth in 2001 and the precipitous drop in capital gains, shortfalls emerged, threatening large deficits. The budgets for the 2001-03 and 2003-05 biennia were balanced largely through the use of non-recurring actions and credit appraisal will reflect the course of the economy and revenue realization as well the sustainability of expenditure controls.