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RE Centerville Mn MOODy'S ASSIGNS INITIAL A2 RATING TO THE CITY OF CENTERVILLE'S (MN) $2.545 MILLION GO IMPROVEMENT BONDS, SERIES 2004B NEW YORK, May 13, 2004 -- Moody's Investors Service has assigned an initial A2 rating to centerville's (MN) $2.545 million General Obligation Improvement Bonds, Series 2004. The 2004 bonds are secured by the city's general obligation unlimited tax pledge. proceeds from the issue will be used to finance infrastructure improvements in the city. The initial A2 rating is due to a favorable location in the TWin cities area, strong financial position with healthy reserves, and low debt burden. SMALL RESIDENTIAL CITY 18 MILES NORTH OF ST PAUL Moody's believes that Centerville will remain stable given its residential tax base and location near the TWin cities. Located 18 miles north of St paul (rated Aa2 with a positive outlook), many residents take advantage of ample employment opportunities in the surrounding area or commute into the city. The tax base, 86% of which is residential, has grown at a rapid average annual rate of 20.8% over the last five years. Management cites ongoing residential growth for the increase and~ while there are still several housing developments currently under construction, ofricials indicate that the amount of available land is declinin9 rapidly and has limited annexation potential. Per capita income and median famlly income are 107% and 135% of state averages, respectively. STRONG GENERAL FUND POSITION Moody's expects that the city's financial performance will remain strong given healthy reserve levels and a history of conservative budgeting. Fiscal 2003 results show a General Fund balance of $1 million, or 54.7% of revenues, which represents a moderate increase over the prior year's $937,000 or 44.3% of revenues. Management expects flat operations in fiscal 2004 and indicates that expenditures to date are in line with budget expectations. The city reported a fiscal 2003 operating surplus of $130,448 in spite of unexpected mid year cuts in Minnesota state aid totaling $88,000. In fiscal 2004, state aid was cut an additional $19,000, but the city will levy back the full 60% allowed by the legislature. Moody's notes that the city's Local GOvernment Aid has been reduced to zero, and that this diminished reliance insulates the city from any further uncertainty at the state level. ABOVE AVERAGE DEBT LEVELS AND RAPID PRINCIPAL AMORTIZATION Moody's believes that the city's debt level will remain manageable. At 5.8%, the overall debt burden is above average for similarly sized citles; however, much of the debt is driven by borrowing of overlapping entities. The d"irec.t debt burden is a more modest 2.0%, with 78.4% ral?idly amortized in 10 years. City officials indicate that future borrowing will be llmited to a potential Sl.5 million issue for which the city would be responsible for approximately one-third, to build a shared police station, as well as possible small projects that would be supported through special assessments. KEY STATISTICS: 2000 population: 3,202 2003 full valuation: $297 million 1/2004 county unemployment rate: 5.0% page 1