LOS ANGELES -- Fresno is expected to be the first of many California cities to sell certificates of participation secured by gasoline tax payments from the state under a new financing structure.

The $11.2 million certificates issue received investment-grade marks last Thursday from the rating agencies, with an A1 from Moody's Investors Service and an A-plus from Standard & Poor's Corp.

"They broke new ground with this one," said Robert L. Junker, a senior analyst of Moody's. "As far as I know, this is the first issue [in California] backed by gas taxes collected on a statewide basis."

The Fresno City Council is scheduled to vote Dec. 3 on final approval for the certificates sale. The Fresno Joint Powers Financing Authority will issue the certificates to fund several small construction and acquisition projects that include new sidewalks and rebuilding older streets.

California's market participants are watching the financing closely because other cities could follow Fresno in structuring such deals.

"It's going to be a very attractive issue for a lot of cities," said Robert L. Williams Jr., a vice president of Sutro & Co., the underwriter on the financing.

Local issuers in Florida, Michigan, and New Mexico have sold debt secured by gas tax payments, but the revenues were not collected statewide, according to Mr. Junker. Arizona's local governments can sell debt backed by gas tax revenues collected on a statewide basis, said Peter Bianchini, an assistant vice president of Standard & Poor's Corp.

California law prohibits the use of state gas tax collections to secure bonds, but lawyers decided the revenues can back certificates, which are not considered debt under state law. Barney A. Allison, a partner at Fresno's bond counsel, Nossaman, Guthner, Knox & Elliott, said the structure is "applicable for any city or county ... providing there is the population base to support it."

Fresno, with more than 300,000 residents, had explored obtaining insurance for the certificates, but because of the favorable ratings may not need enhancement, according to Mr. Allison.

California voters in June 1990 approved Proposition 111, a 9-cent gas tax increase, which boosted gas tax monies flowing to cities. The revenues from this increase are just beginning to trickle down to counties and cities. The gas tax increase, when combined with existing gas tax revenues the state returns to localities, provides added monies that cities can pledge to debt payments.

Gas tax collections are subjet to economic and political pressures, Mr. Junker noted, but he added that Fresno's fiscal 1991 gas tax revenues will provide nearly five times peak debt-service coverage on the certificates. Analysts also looked favorably on the fact that gas tax revenues collected statewide are allocated to cities based on population, and Fresno's population growth has exceeded the state level in recent years.

"I think that once we close this transaction, it will open the door for other cities," said Randy Carlton, deputy treasurer for Fresno.

The Fresno financing will be structured so the certificates have a first lien position on gas tax revenues, meaning that any gas tax monies received by Fresno will first cover debt service on the certificates.

Gas tax collections in California have increased more than 11% annually since 1987, even when accounting for a decrease in gas use this year due to the Persian Gulf war and an economic slowdown.

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