OREANDA-NEWS. Fitch Ratings affirms Vanderburgh County Redevelopment District, Indiana's (the district) outstanding tax increment revenue bonds (TIFs) as follows:

--\$1.1 million tax increment revenue bonds (Burkhardt Road economic development area), series 2005 at 'BBB+'.

The Rating Outlook is Stable.

SECURITY

The bonds are payable from tax increment revenues generated within the Burkhardt Road economic development area (the area). The bonds are also supported by a common cash-funded debt service reserve fund.

KEY RATING DRIVERS

SATISFACTORY DEBT SERVICE COVERAGE: Pledged revenues provide acceptable debt service coverage for the current rating level. These levels hold up well under Fitch-designed scenarios that stress collections. No additional leveraging is expected.

LIMITED TAX INCREMENT FLUCTUATION: State statutes including the circuit breaker and tax neutralization limit potential revenue volatility.

PROJECT AREA IN NOTABLE RETAIL ENVIRONMENT: The project area includes well-known retailers, commercial and light industrial establishments, and multifamily residences. The area benefits from its location within a regional hub, although competitive retail locations are nearby.

RESILIENT YET CONCENTRATED TAX BASE: The concentrated tax base appears to have recovered after modest declines during the recent economic downturn. The high increment value-to-base year value reflects the maturity of the project and moderates potential assessed value (AV) and revenue volatility and a neutralization process protects AV that has been captured for the district.

ADEQUATE LEGAL PROVISONS: The additional bonds test is somewhat weak and the debt service reserve fund is cash-funded.

RATING SENSITIVITIES

COLLECTION VARIANCES: This rating is sensitive to the volatility inherent in the pledged revenue stream, particularly due to weak collections or significant appeal levels.

TIF NEUTRALIZATION CHANGES: Changes to Indiana's TIF neutralization legislation could remove one of the key downside mitigants and materially weaken the rating. No change is currently expected.

CREDIT PROFILE

The area is located in Vanderburgh County near the city of Evansville, in the southwestern corner of the state.

SATSIFACTORY DEBT SERVICE COVERAGE

Debt service coverage, inclusive of the parity bonds, was 1.77times (x) in fiscal 2013. This is consistent with the range of 1.6x - 1.8x since the issuance of the 2008 bonds. Debt service coverage stands up well to Fitch-designed stress tests that assume additional AV reductions. AV would need to decline about 45% from 2013 levels for coverage to fall to 1.0x. The district does not currently plan to issue additional debt backed by the tax increment pledge.

According to the district, year end 2014 coverage is expected to be 1.80x and coverage for 2015 is estimated to be 1.88x. These estimates are based on estimated final county AV determination. Year end 2015 estimates of the maximum revenue that could be collected would result in a flat or modest increase. The county reports that the majority of appeals have been concluded at this time, suggesting AV stability.

Additionally, each year the state reviews county AV as part of a required AV neutralization process. The process takes into account successful appeals and can apportion the total reduced AV between the base year and the incremental AV in order to protect the AV captured for the district. Fitch anticipates that ultimately debt service coverage will remain within the historical range.

STABLE, CONCENTRATED PROJECT AREA ADJACENT TO OTHER RETAIL

The 4,650-acre project area represents 6% of the county's tax base. The project area AV grew 11.6% in 2013, following a 14.3% decline, the only substantial deterioration before the recession.

Incremental AV also performed adequately, with a recent 7.4% rebound after three years of decline, which averaged about 6% annually. The project area benefits from a high incremental value as a percent of base value, consistently over 300%, somewhat shielding the district from AV volatility.

The tax base is highly concentrated. The largest taxpayer constitutes 8.6% of total AV and the 10 largest taxpayers represent a significant 40% of AV. The district benefits from its diverse establishments, including retail, commercial and light industrial, and apartments, although this is somewhat offset by nearby competing retail centers.

AVAILABLE LIQUIDITY

Solid reserve levels provide the district flexibility to fund future capital needs and, while not pledged, is available to service debt. The fiscal 2013 audit indicates district cash and reserves of \$23.3 million. The district indicated that fiscal 2014 is expected to show slight increases to reserves, which Fitch believes is likely, given historical trends. The district plans to use some of its reserves in the intermediate term to continue funding a large capital project to widen roads, which could increase access to the district. Fitch positively notes that to date, the county has been able to increase reserves while funding this improvement.

ADEQUATE LEGAL PROVISIONS

The additional bonds test is somewhat weak at 1.4x maximum annual debt service (MADS). The debt service reserve fund is cash-funded, with a standard requirement equal to the least of MADS, 1.25x average annual debt service, or 10% of total bond proceeds.

STABLE SOCIOECONOMIC FACTORS

The district has benefitted from the city's role as a regional hub and the area's stable economy. County and regional unemployment in November 2014 is equivalent to that of the nation. The regional economy has above-average concentrations in professional services as well as in education and healthcare. Wealth levels are below national averages.