Fitch Rates Denver, CO's $28.6MM Excise Tax Bnds 'AA-'.

Business Editors

CHICAGO--(BUSINESS WIRE)--March 12, 2003

Fitch Ratings has assigned a 'AA-' underlying rating to the City and County of Denver, CO's $28,630,000 excise tax revenue refunding bonds, series 2003 (the bonds). The bonds, which are expected to be insured by a 'AAA'-rated

Bond proceeds combined with cash contributions from the city will refund the outstanding $36.1 million excise tax revenue bonds, series 1985A & B. This refunding is structured to decrease annual debt service payments to approximately $3 million from $6 million by extending the final maturity to 2015 from 2008. Together with a lower refunding bond interest rate, this extension is expected to result in approximately $3 million of additional cash flow capacity annually, which the city plans to use to cover debt service payments on certificates of participation expected to be sold within the next few months. The upcoming certificate issue will finance renovations to the city-owned Quigg Newton Denver Municipal Auditorium. Overall, the series 2003 refunding bonds are expected to generate a net present value savings of $1.5 million.

The 'AA-' rating on the bonds reflects very strong debt service coverage from pledged revenues, satisfactory legal provisions, and Denver's strong credit characteristics, reflected in the city's 'AA+' general obligation bond rating. The bonds are secured by the city's Facilities Development Admissions Tax (seat tax) and Employee and Business Occupational Privilege Taxes (head taxes.) The seat tax is levied in the amount of 10% on the price of each admission to cultural arts and entertainment events in City-owned facilities. The head taxes are levied monthly on each employee performing services within the city for an employer. (The employee pays $5.75 per month and the employer pays $4.00. Governmental entities and certain non-profit groups do not pay their employer portion.) The city also pledges to bondholders its $2.7 million annual payment received by the Denver Broncos Football Club in lieu of seat taxes in connection with the team's move from the city-owned Mile High Stadium to a privately owned facility. These annual payments, which commenced in 2001, account for approximately 6% of total excise tax revenue and end in 2008.

Combined, the pledged excise taxes -- including interest earnings -- have generated an annual average of $50.3 million in revenue since 1993 and have provided over 8.0 times (x) coverage of the current year's debt service. In 2002, unaudited pledged excise tax revenues totaled $49.2 million, providing approximately 8.2x coverage of debt service that year. Upon issuance of the refunding bonds, debt service coverage is expected to increase to over 15x providing substantial protection to bondholders. Currently the city uses excess seat tax revenues to fund improvements to facilities from which the taxes are levied. Excess head tax revenues are deposited equally into the general and capital improvement funds.

While debt service coverage is high, the head and seat tax collections have been shown vulnerability recently. Head tax revenue declined 7.2% since its peak in 2000, and seat tax revenue fell 6.4% over the same period.

In addition to strong coverage, this rating reflects satisfactory legal provisions including a required debt service reserve fund equal to 10% of bond proceeds and a historical 1.25x additional bonds test. Denver, also exhibits strong credit characteristics which include a diverse economic underpinnings, strong financial management, and adequate financial operations.