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future development and associated infrastructure needs will be offset in the mid- to long- term by continued growth driven by access to the metropolitan core. SOUND FINANCIAL POSITION EVIDENCED BY AMPLE RESERVES Hoody's expects the city's financial position to remain strong due to a history of sound financial management as demonstrated by a trend of strong operating results. A fiscal 2003 reduction in state aid of approximately $500,000 was offset by better than expected permit revenues and an increase in charges for services. The factors contributed to a modest operating deficit of $113,000, after transfers, resulting in a General Fund balance of $4.07 million, or a strong 52.4% of General Fund revenues. The city also maintains an Equipment Revolving Fund, to which it transferred over $936,000 in 2004. Management expects both revenue and expenditure increases in fiscal 2005, including a $720,000 increase in property tax revenues, and project close to balanced operations. While the city is projecting continued borrowing due to ongoing capital expenditures, including the town center project, Moody's expects that, moving forward, the city will be continue providing solid fiscal management of healthy reserve levels. ABOVE AVERAGE, YET MANAGEABLE, DIRECT DEBT BURDEN; SIGNIFICANT NON-LEVY SUPPORT Moody's anticipates the city's direct debt burden of 2.1% will remain manageable, due largely to the city's growing tax base and continued strong annual growth in full valuation. Principal amortization is a below average with 48% of debt retired in ten years. In addition to the General Obligation pledge, the majority of outstanding GO debt is supported by tax increment revenues or rental income from a fifty unit senior housing facility, reducing the reliance on general levy support. Future issuances include approximately $13 million over the next five years to support infrastructure associated with the town center project. Overall debt burden remains above average at 6.1%, largely reflecting borrowing needs of overlapping entities. KEY STATISTICS: 2005 population: 22,200 2000 median family income as a % of state: 125% 2000 per capita income as a % of state: 112% 2004 full valuation: $1.9 billion 2004 full valuation per capita: $102,337 }Fiscal 2004 General Fund balance: $4.1 million 56.6% of revenues) Direct debt burden: 2.1% Debt burden: 3.3% Payout of principal (ten years): 48% Post sale parity debt outstanding: $15.2 million ANALYSTS: Jeannie C. Iseman, Analyst, Public Finance Group, Moody's Investors Service Jonathan North, Backup Analyst, Public Finance Group, Moody's Investors Service CONTACTS: Journalists: (212) 553-0376 Research Clients: (212) 553-1653 Copyright 2005, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc. (together, "MOODY'S"). Ail rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH 2