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���������ֳ�-New York-02 May 2011: ���������ֳ� assigns an 'A+' rating to the following Florida Municipal Loan Council's (FMLC) revenue bonds issued on behalf of the City of Hialeah, Florida (the city):

--$48.77 million, series 2011D (City of Hialeah Series).

The bonds are expected to sell via negotiation during the week of May 9.

Bond proceeds will be loaned to the city (obligor of the bonds) to be used toward the construction of a new water treatment plant and related facilities.

The Rating Outlook is Stable.

RATING RATIONALE:

--Historically solid financial margins have allowed the city's water and sewer system (the system) to maintain strong liquidity and cash-fund its capital program; however, margins have declined recently and the additional debt will require a series of sizable future rate increases to service the new debt and maintain liquidity.
--While system rates are currently affordable, rate increases coupled with already below-average area income levels may significantly limit future rate raising flexibility.
--The system's debt profile is low even with the addition of the 2011 bonds, although principal amortization is quite slow.
--The system's manageable capital plan is partially tempered by the decision to construct the new plant, which prospectively provides additional capacity to serve new customers.
--The city's location within the greater Miami-Dade County employment base offsets a somewhat limited local economy, which continues to display a stubbornly high rate of unemployment.

KEY RATING DRIVERS:

--Management's willingness and ability to make appropriate rate adjustments to meet the oncoming debt while providing sufficient margins to meet annual system maintenance requirements and preserve adequate liquidity will be critical.
--Maintaining low debt levels and debt carrying charges will be necessary to minimize already increasing rate pressures.

SECURITY:

The bonds are limited obligations of the FMLC payable solely from loan repayments made by the city, which are equal to debt service on the bonds. Pursuant to the loan agreement, the city irrevocably pledges the net revenues of the system to make payment in amounts sufficient to make the principal and interest payments on the bonds.

CREDIT SUMMARY:
The city of Hialeah operates a water distribution and sewer collection system, providing service to approximately 225,000 residents through 54,500 mostly residential accounts. The city is located in Miami-Dade County (the county), and covers approximately 23 square miles. While the city is mostly developed, an additional three square miles of undeveloped land was recently annexed, providing future growth opportunities. Currently, the system provides water distribution and wastewater collection only, purchasing all of its potable water, as well as conveying 100% of its wastewater flows for treatment, on a wholesale basis from Miami-Dade County's water and sewer system (MDC).

As a condition to the annexation of formerly unincorporated county land, the city is required to extend water services to the area. The proceeds of the 2011 bonds will be used to build the city's first water treatment plant, a 10 million gallons per day (mgd) reverse osmosis (RO) facility that will primarily serve this newly annexed area, as well as provide additional treated sources to the county's northwest quadrant. The new plant will have its own raw water supply from the more brackish Floridan Aquifer, and will be regulated by the South Florida Water Management District under the county's existing consumptive use permit. The new plant will be a shared facility with MDC and will be constructed and operated by the developer through a design, build, and operate agreement signed in 2010. While ���������ֳ� believes the area will see development eventually, given the current economic climate and weak housing market for existing homes in south Florida generally, full plant utilization is unlikely in the intermediate term. Therefore, the burden of servicing the city's share of the new plant will fall on the existing customer base, which will cause user rates to rise fairly significantly.

Rates consist of a base 'readiness to serve' charge and commodity charges. Monthly residential rates for combined service are currently affordable at $47 for 7,000 gallons of use. At present, rates also are below many peer systems. But as debt service rises over the next few years, and absent any meaningful growth in customers, a series of rate increases will push rates above ���������ֳ�'s rate affordability threshold of 2% of median household income by 2015. Prudently, the city has historically passed along automatic inflation-based rate adjustments, as well as a systematic pass-through of any wholesale rate increases from MDC. ���������ֳ� expects this practice to continue.

Historically solid financial margins have weakened somewhat over the past few years as operating expenditure growth has outpaced the mostly stable trend in operating revenue performance. However, annual financial surpluses coupled with a lack of debt have led to strong system liquidity, allowing management to fund its capital needs with cash. Unrestricted cash and investments at the end of fiscal 2009 totaled $44 million, which equaled a strong 450 days of operating expenses. For fiscal 2010 (preliminary and unaudited), the system expects to end the year with some drawdown of reserves but still maintain a solid 290 days of operations. The solid system liquidity is somewhat tempered by the high average age of plant (25 years), which signals the system may still have sizable deferred maintenance even after spending roughly $12 million over the past few years on a comprehensive upgrade of its sewer lines to deal with inflow and infiltration.

Financial projections provided by the city indicate the system will generate 1.9 times(x) coverage of annual debt service (ADS) in fiscal 2013, rising to 2.5x by fiscal 2015; ADS is capitalized for fiscal 2012. Coverage of maximum ADS (fiscal 2017) from unaudited fiscal 2010 net revenues is 1.2x. The forecast assumes no growth in the revenue base from new customers and no impact fees, but it does include proposed annual cost of living and pass-through rate increases, which are sizable. Additional rate increases could be necessary to appropriately fund renewal and replacement expenses and maintain the system's sound liquidity position.

After issuance, debt levels will be manageable. Debt per customer is expected to be just $457, which is well below average for comparably-rated water and sewer systems. Capital needs are also manageable, although the majority of the plan, which totals $124 million through 2014, will build the new RO treatment plant and related lines, mains, and supply wells. Until the customer base is developed in this area, however, the existing customers will support this new debt. After an initial capitalized interest period, and a slow incline in debt service, debt service is essentially level at $3.5 million beginning in fiscal 2017; amortization is very slow with just 39% retired within 20 years. The absence of additional bonding plans and a manageable capital program helps offset the slow principal amortization.

Legal provisions are below average with a rate covenant that requires 110% coverage of ADS from net revenues, or the requirement could be met with just 105% ADS coverage from net revenues, and 120% ADS coverage with connection fees. The additional bonds test has similar requirements as the rate covenant, with coverage of maximum ADS required. The bonds are being issued without a debt service reserve fund.

The FMLC is a public body created under the laws of the state of Florida to finance projects on a cost effective basis and to benefit municipalities through economies of scale. Its board of directors consists of five elected officials appointed by the president of the Florida League of Cities, which is the program's administrator. The FMLC will stay in existence as long as any obligations of the city or of any other participating entities issued under the program remain outstanding.

Contact:

Primary Analyst
Andrew DeStefano
Director
+1-212-908-0284
���������ֳ�, Inc.
One State Street Plaza
New York, NY 10004

Secondary Analyst
Barbara Ruth Rosenberg
Director
+1-212-908-0731

Committee Chairperson
Doug Scott
Managing Director
+1-512-215-3725


Media Relations: Cindy Stoller, New York, Tel: +1 212 908 0526, Email: cindy.stoller@fitchratings.com.

Additional information is available at ''

In addition to the sources of information identified in the 'U.S. Revenue-Supported Rating Criteria', dated Oct. 8, 2010, this action was additionally informed by information from Milian, Swain & Associates, Inc. (the consulting engineer) and IHS Global Insight.

Applicable Criteria and Related Research:

--'U.S. Revenue-Supported Rating Criteria', dated Oct. 8, 2010;
--'Water and Sewer Revenue Bond Rating Guidelines', dated Aug. 6, 2008;
--'2011 Water and Wastewater Medians', dated Jan. 18, 2011;
--'2011 Outlook: Water and Wastewater Sector', dated Jan. 18, 2011.

For information on Build America Bonds, visit .

Applicable Criteria and Related Research: