OREANDA-NEWS. Fitch Ratings affirms the following rating for the Olive Boulevard Transportation Development District, Missouri (the district):

--\$2,960,000 transportation sales tax and special assessment revenue bonds series 2005 at 'BBB+'.

The Rating Outlook is Stable.

SECURITY

The bonds are payable from, subject to annual appropriation, a 0.5% sales tax pledge on virtually all retail sales within the district, and from a capped provisional special assessment. The sales tax expires June 2030, after the final maturity of the bonds. Additionally, there is a cash funded debt service reserve totaling roughly \$239,000 (135% of assumed annual debt service if debt were repaid through stated maturity).

KEY RATING DRIVERS

ECONOMICALLY SENSITIVE AND GEOGRAPHICALLY LIMITED TAX: Pledged sales tax revenues are susceptible to economic fluctuations and are derived from a small geographic area.

PAYER CONCENTRATION: There is point-of-sale concentration with the top 10 payers accounting for roughly 69% of total fiscal 2014 revenues.

PROVISIONAL SPECIAL ASSESSMENT: Bondholders benefit from a provisional special assessment which slightly diversifies revenues but is currently limited to only one taxpayer.

TURBO REDEMPTION FEATURE: Excess revenues continue to prepay (turbo) principal in excess of projections, increasing the magnitude by which revenues could decline and still allow for scheduled debt repayment through final stated maturity in 2029.

ANNUAL APPROPRIATION: The transfer of sales tax revenue to the bond fund is subject to annual appropriation; however, there is little incentive not to appropriate as the revenues remain stranded if not appropriated.

RATING SENSITIVITIES

ADEQUACY OF REVENUES: The rating is sensitive to shifts in district pledged revenues, derived from generic retail establishments located within an extremely small geographic area.

CREDIT PROFILE

The district encompasses a 0.12 square mile area located within the central retail corridor of the city of Creve Coeur. The city is an extremely affluent suburb of St. Louis with per capita income levels at 231% of the state average, adjacent to Maryland Heights, also displaying above-average socioeconomic indicators.

SMALL, CONCENTRATED BASE

The district was created in 2004 by petition of certain property owners and is governed by a seven-member board of directors selected by district property owners and currently consisting of four city officials and three district representatives. There are currently approximately 70 sales tax paying retail establishments located within the district, consisting of small generic businesses with numerous local competitors, an automobile dealership, a bank, and an office complex. There is point-of-sale concentration with the top 10 payers accounting for roughly 69% of fiscal 2014 sales tax revenues. Top payers include a hotel, a boutique grocery store, a lawn equipment retailer, two sit-down restaurants, a pharmacy, and a camera store. One of the top 10 payers (the camera store) recently left the district, but a specialty grocery store recently opened that should more than offset the lost revenues.

BOND STRUCTURE

There is a provisional special assessment levied on three office buildings located within the district that are currently owned by one taxpayer. If annual sales tax revenues are less than \$442,000 (which represents 1.25x assumed annual debt service without accelerated repayment), the special assessment is levied to fund the shortfall up to a maximum annual assessment of \$141,577 (40% of assumed debt service).

There is a 12-month look-back feature on sales tax revenues, whereby any necessary special assessment is levied and collected by Dec. 31 to augment the district's ability to make the next year's debt service payment. The special assessment becomes a tax lien on the property if unpaid. The special assessment has been levied and collected in amounts ranging from \$33,137 to the maximum (in 2006) every year since the bonds were issued. Annual coverage of assumed debt service payments from primary sales tax revenues (net of the special assessments) has been more than sufficient in all years.

The bonds are structured as two bullet maturities in 2022 and 2029 with a special mandatory redemption feature whereby all excess revenues must redeem the 2022 maturity and then the 2029 maturity. Annual sales tax revenues have been tracking above projections since 2006, despite a 6% drop in 2010.

Assuming no growth in sales tax revenues from 2014 levels coupled with provisional special assessment payments to reach \$442,000 in total revenues, the 2022 maturity should be retired by 2016 and the 2029 maturity by 2023.

REPAYMENT SCENARIOS

Fiscal 2014 sales tax collection increased 3% from fiscal 2013. As a stress test, if 2015 collections declined 46% and remained flat thereafter, and no provisional special assessment revenues were collected from 2015 through 2019, sales tax collections plus the cash funded debt service reserve would be adequate to retire the bonds by the stated maturity date. However, given the extremely small geographic area, point-of-sale concentration, presence of abundant local competitors, and incongruent lease terms of district retail tenants to the bond's final maturity, there is significant risk of future sales tax revenues declining materially and permanently. In addition, special assessment payments rely on a single taxpayer.

Covenants are loosely written with no formal additional bonds test, although the district is not currently contemplating additional parity debt secured by the sales tax pledge. There are several practical hurdles to issuing parity debt, including the approval of both the city of Creve Coeur and all business owners, including the special assessment payer, as well as a majority of bondholders.