2009 Credit Rating Report -Standard & Poors Research Update-June 11/10

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Research Update: County of Essex 'AA -' Ratings Affirmed firmed On Good Financial Position And Low Stand -Alone Debt; Outlook Stable decline compared with stable performances of 15% of operating revenue since 2002. Conversely, Essex's balance after capital expenditures improved notably to about 6.0% of total revenue, compared with 1.6% in fiscal 2007. The increase was the result of a marked increase in grants that somewhat mitigated elevated capital spending. We believe that the ability to generate sizable operating surpluses is a key credit strength, because it provides the county with the financial flexibility to maximize pay -as- you -go financing and limit debt issuance. We believe the following somewhat offset these credit strengths: • Despite having a strong stand -alone financial risk profile, the financial risk profile of lower -tier member municipalities influences Essex's credit quality. Lower -tier debt issuance indirectly influences the county's overall debt - carrying capacity. • Essex's economy is relatively less diversified than that of most domestic peers. The county's economy is heavily concentrated in manufacturing, particularly in the cyclical automotive sector, with remaining employment largely rural. As a result of the recent downturn, especially in Ontario's manufacturing sector, indicators point to below - average economic performance: The unemployment rate in the Essex - Windsor area was about 12.6% in 2009, a notable increase from the 9.0% in 2008. In addition, and as expected, income - support caseloads increased by about 16.8 %. Conversely, construction activity results improved somewhat, as building permits and housing starts increased about 40.1% and 8.2 %, respectively, in 2009. Nevertheless, we expect moderate diversification strategies to benefit the county's economy modestly. For example, Essex is refocusing its manufacturing away from the automotive sector, toward sectors such as alternative energy, medical equipment, aerospace, and pure and applied research and development. Outlook The stable outlook reflects our expectation that there will be no material increase in the county's debt and that cash and investment balances will remain strong. Standard & Poor's also expects that Essex will continue to produce stable operating results. A dramatic increase in debt at the lower -tier level or a major economic deterioration could lead to a negative rating action. Related Criteria And Research • Rating International Local And Regional Governments, Jan. 5, 2009 • Request for Comment: International Public Finance: Methodology For Rating International Local And Regional Governments, May 11, 2010 www. standardandpoors .com /ratingsdirect 3 8038451300071004