OREANDA-NEWS. Fitch Ratings has assigned an 'AAA' rating for the Port of Seattle (the port), WA's \$155.1 million limited tax general obligation (LTGO) and refunding bonds series 2015.

In additional, Fitch has affirmed the 'AAA' rating for \$225.4 million outstanding LTGOs.

Fitch has also affirmed the port's 'AAA' implied unlimited tax general obligation (ULTGO) rating. The port has no ULTGO bonds outstanding.

Purpose: Proceeds from the bonds will be used to pay a portion of the port's contractual payment to the state for the Alaskan Way viaduct replacement program, refund a portion of the outstanding LTGO bonds, series 2006, and pay the costs of issuance. The bonds will be sold via competitive sale on March 24, 2015. The bonds fully mature on Dec. 1, 2040.

The Rating Outlook is Stable.

SECURITY

The LTGO bonds are payable from ad valorem taxes in the port district (King County) levied as permitted without a vote. The ad valorem tax pledge for payment of the LTGO bonds is constrained by property tax levy growth of 1% per year, plus new construction.

KEY RATING DRIVERS

SOLID ECONOMIC FUNDAMENTALS: The port is coterminous with King County (the county) (ULTGOs rated 'AAA' by Fitch) and benefits from the county's above average income levels, steady population growth, and role as a regional economic and cultural center. Significant job growth has reduced the unemployment rate to a low 4.1%.

AMPLE TAX LEVY CAPACITY: The port maintains ample capacity to meet its payment obligations (despite the 1% tax levy growth limitation) due to significant 'banked' levy capacity and policies that limit leveraging.

TAX BASE GROWTH: Recent growth in taxable assessed value (AV) includes gains of 13.5% and 8.2% in 2015 and 2014, respectively. The tax base continues to benefit from an improving real estate market and significant development activity in the county. The diverse tax base had contracted annually from 2010 through 2013 as the real estate market remained relatively soft but recovered nearly all the lost value in 2015.

FAVORABLE DEBT PROFILE: Overall tax-supported debt ratios are projected to remain moderate given the port's relatively limited additional debt plans which primarily consist of an additional issuance to finance its share of Seattle's Alaska Viaduct replacement project. Outstanding LTGO debt amortizes at a rapid rate.

STRONG ASSET BASE: The port operates Seattle-Tacoma International Airport (Sea-TAC), the primary regional air passenger service provider with a virtual monopoly in the Seattle area (72.1% origination and destination). Its seaport is one of the nation's largest container ports, although it operates in an extremely competitive west coast port environment with shippers continually making adjustments between the various ports to the gulf and east coast.

DIVERSE REVENUE BASE: The port has large and diverse revenue streams between and within its airport, seaport, and real estate divisions, including tax levy revenues that are assessed over King County. The airport division contributes nearly 76% of total operating revenues while the seaport division generates 18%.

RATING SENSITIVITIES

The rating is sensitive to shifts in fundamental credit characteristics including management's prudent debt policies and practices. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

SOLID ECONOMIC FUNDAMENTALS

King County benefits from a diverse economy and tax base that encompasses almost 29% of the state's population. The county includes the Pacific Northwest's largest city, Seattle, and serves as a regional economic, medical, and cultural center. Wealth and income levels are well above national averages, and AV is high at \$189,000 per capita.

The county has benefited from above average employment and labor force gains since 2011. The unemployment rate as of December 2014 was 4.1%, which compares favorably to the state (6.2%) and nation (5.4%). Boeing, Microsoft and the military remain significant employers in the area. However, increasing diversification from Amazon along with other technology, healthcare, and other industries have supported recent employment growth and are likely to fuel continued gains in the area.

RECENT TAX BASE GROWTH

The county's AV grew a strong 13.5% in 2015 following a 8.2% increase in 2014. The cumulative 18.6% decline from 2010-2013 has largely been recovered as the real estate market has improved, driven, at least partly, by significant job and population growth. Significant additional development, particularly in the city of Seattle, has also been an important contributor to the increased tax roll.

The tax base is diverse with the top 10 taxpayers comprising just 3.9% of total AV in fiscal 2014.

AMPLE LEVY CAPACITY

The port's maximum levy (for general purposes and debt service) may be increased by 1% per year plus new construction, and is only limited as to rate for the general portion. This general purposes component is well under the limit. The port retains some banked capacity (about \$22.1 million) from previous years when it did not raise the levy by the full permitted amount. The maximum potential levy for 2015 was \$95.2 million, which is sufficient to cover the estimated maximum annual LTGO debt service of \$35.7 million.

Additional financial cushion is provided by management's relatively conservative use of the tax levy and LTGO issuance, maintaining a policy of leveraging no more than 75% of the levy for debt service. For fiscal 2015, the budgeted GO bond debt service is equal to about 45% of the budgeted levy. The remainder is budgeted, as is typical, for non-revenue generating real estate operations and infrastructure, environmental mitigation, and the regional freight mobility initiative.

Future leveraging is expected, as the port is a partner in Seattle's Alaskan Way Viaduct replacement project and has committed to providing up to an additional \$147 million for the project. An additional issuance of \$100 million in 2016 along with \$47 million in available funds are expected to meet the port's commitment to the project. The additional issuance is expected to be payable from the existing tax levy.

FAVORABLE DEBT PROFILE

The port's overall debt levels are moderate at 1.7% of AV and \$3,326 per capita. The majority of the debt burden is from overlapping debt issued by school districts and cities within the county. Debt levels are not expected to be materially affected by the port's planned 2016 issuance of approximately \$100 million in LTGO bonds.

The rapid amortization rate of outstanding LTGO bonds is viewed positively. Approximately 66% of LTGO principal (including the current issue) is scheduled to be repaid within the next 10 years.