OREANDA-NEWS. Fitch Ratings has assigned an 'AAA' rating to the following Champaign, Illinois (the city) general obligation (GO) bonds:

--\$8.855 million GO refunding bonds series 2015.

The bonds are scheduled to be sold via negotiated sale the week of March 23rd. Proceeds will be used to refund a portion of the outstanding series 2008 bonds.

In addition, Fitch affirms the city's \$62.9 million outstanding GO bonds at 'AAA'.

The Rating Outlook is Stable

SECURITY

The bonds are payable from ad valorem taxes levied on all taxable property within the city without limitation as to rate or amount.

KEY RATING DRIVERS

UNIVERSITY PROVIDES STABILITY: Champaign's stable economic base is anchored by the presence of the University of Illinois.
DIVERSE REVENUE STREAM: The city's revenue stream is fairly diverse and includes sales, property and income taxes. The city's home-rule taxing authority increases financial flexibility, which the city recently utilized to increase the local sales tax rate.

STRONG FUND BALANCE: Fund balance levels have been growing and remain healthy, although the city remains dependent on economically sensitive revenues.

SOLID MANAGEMENT: Strong and steady financial management is reflected in conservative budgeting, sophisticated and comprehensive internal policies and active expense management.

MANAGEABLE LONG-TERM OBLIGATIONS: Carrying costs are a moderate portion of the city's total governmental budget, which is largely attributable to rapid principal amortization and proactive overfunding of required annual pension contributions. Overall debt levels are considered low and the city's unfunded pension liability is declining.

RATING SENSITIVITIES

STABLE CREDIT PROFILE: The rating is sensitive to shifts in fundamental credit characteristics including the city's solid reserve levels. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

Champaign is located in central Illinois and is home to the University of Illinois at Urbana-Champaign. The university's 2014 enrollment was about 44,000 (a cumulative increase of about 10% over the past decade) and it employs over 10,000 people. The city's 2013 population of 83,424 has increased 13% over the past decade.

STABLE ECONOMY ANCHORED BY UNIVERSITY

Champaign has grown at an accelerated pace through annexations in tandem with residential investment and cooperative county-wide economic planning efforts with the participation of other local governments, the private sector, a community college, and the university. After five years of growth in the property tax base, the city posted three years of small declines in assessed value despite significant recovery in construction activity. Fitch believes that the city's expectations for modest growth for fiscal 2015 are reasonable given the assessment lag in Illinois and recent positive trends in construction activity and the local housing market. The city does not anticipate additional annexations over the near-term as recently annexed land is still being built out. There has also been development in areas adjacent to the university campus and in the university's research park.

The unemployment rate of 5.3% as of December 2014 has declined from the 7.9% recorded a year prior, due to robust employment growth outpacing a slight labor force gain. The rate remains comparable to state and national averages. Wealth levels are below average, reflecting the city's large student population. Educational attainment levels are well above state and national averages.

STRONG FINANCIAL PROFILE

Financial operations in the city are characterized by conservative, forward-looking budgeting and careful cost management. Five-year financial forecasts, monthly revenue reports, quarterly financial reports, and budget checks on all significant purchases help guide the city's resource allocation and allow its timely response to challenging economic conditions. The city retains a sound degree of expenditure flexibility, as the majority of recent spending reductions have occurred through employee attrition and early retirement incentives.

Champaign's home rule status gives it considerable revenue-raising flexibility. Its primary revenue sources are a property tax (16% of general fund revenues), home rule and state sales taxes (a combined 48%) and income tax (12%). The city has experienced structural balance over the past four consecutive fiscal years, finishing fiscal 2014 with a \$701,000 general fund surplus despite budgeting for a planned draw related to one-time uses. The surplus increased unrestricted general fund balance to \$23.6 million, or a very strong 34.9% of spending (well above the city's 10% policy level). On Jan. 1, 2014, the home rule sales tax was increased by .25% to 1.5% (comparable to other nearby home rule communities), generating an estimated \$3 million a year in additional revenue that will be used in part to restore several positions that were eliminated during the recession..

Management historically has appropriated a portion of general fund reserves to balance the budget and the fiscal 2015 budget includes an appropriation of \$4.1 million for one-time items. Fitch believes actual results are likely to be better, given the city's history of budgetary outperformance and prudent financial planning.

MANAGEABLE DEBT AND PENSION OBLIGATIONS

The city's overall debt is a low \$1,314 and 2.5% of market value. The city's debt amortizes rapidly with 84% of principal retired within 10 years. The city's policy of financing routine maintenance and even large capital projects through operating sources have kept the city's infrastructure well maintained while minimizing its debt burden. The city may issue up to \$17 million in 2016 for stormwater system improvements, which Fitch believes will likely be self-supporting and have a minimal effect on the city's overall debt profile.

The city maintains single-employer pension plans for its police and fire employees and amortizes 86% of the outstanding liability for these through 2020, with the remainder through 2029, rather than 90% through 2040 as permitted by state law, consistently paying more than the annual required contribution. As of June 30, 2013, the police pension is 74% funded while the fire pension is a strong 82% funded, assuming a 7% rate of return on investments for both. The city also participates in the cost-sharing multi-employer Illinois Municipal Retirement Fund, which is well-funded at approximately 78% as of Dec. 31, 2013, assuming a 7% rate of return on investments. The city's exposure to other post-employment benefits (OPEB) is limited to an implicit rate subsidy. The associated unfunded liability of \$9.9 million is minimal, amounting to 0.2% of tax base market value. Carrying costs for debt, pension ARC and OPEB contributions represent 16.5% of total governmental spending or a still manageable 18.7% when the supplemental pension payments are considered.