OREANDA-NEWS. Fitch Ratings affirms the following rating on Centennial Authority, North Carolina (the authority):

--\$26.9 million revenue refunding bonds, series 2009 at 'AA-'.

The Rating Outlook is Stable.

SECURITY

The bonds are limited obligations of the authority, payable solely from and secured by a pledge of and lien on the authority's receipt of a portion of the 6% room occupancy tax and the 1% prepared food and beverage tax (collectively, the special taxes) levied by Wake County (the county).

The county, the City of Raleigh (the city), the Town of Cary, and the Greater Raleigh Convention and Visitors Bureau share in the proceeds of the special taxes according to a formula specified in the special tax act. According to an inter-local agreement, the county and city each transfer their respective shares of the special tax to the trustee on behalf of the authority on a monthly basis up to the debt service requirement. The bonds are also secured by a reserve fund funded with a surety policy issued by Assured Guaranty Corp.

KEY RATING DRIVERS

SUPERIOR LEVELS OF COVERAGE: Fiscal 2014 available special tax revenues provided an elevated 6.0x coverage of maximum annual debt service (MADS). Coverage levels are expected to remain strong due to a solid 2.0x MADS additional bonds test (ABT).

PLEDGED REVENUE STABILITY: Special tax receipts have been relatively stable, declining in only three fiscal years since 1993. All of the special tax declines were modest with none exceeding 4%, regardless of the severity of past recessions.

LIMITED EXPOSURE TO OPERATIONS: The authority's responsibilities are limited to monitoring facility operations and managing the arena's capital and enhancement needs. Management of day to day operations is performed by a subsidiary of the Carolina Hurricanes.

BROAD AND DIVERSIFIED ECONOMIC BASE: The area economy benefits from Raleigh's position as the state capital and proximity to Research Triangle Park. The area's employment and population growth are among the fastest in the nation.

RAPID AMORTIZATION: The series 2009 bonds, the only outstanding debt of the authority, fully mature in 2019.

RATING SENSITIVITIES

REDUCED COVERAGE LEVELS: A precipitous decline in special tax revenues would reduce debt service coverage which could result in negative rating action.

CREDIT PROFILE

The authority was created by the North Carolina General Assembly in 1995 as a political subdivision of the State of North Carolina (the state). The authority's primary purpose is the ownership and operation of a 20,000-seat multi-purpose arena currently known as the PNC Arena. The arena hosts the National Hockey League's Carolina Hurricanes and the North Carolina State University (NCSU) men's basketball team pursuant to long-term leases which extend through 2024 and 2096, respectively as well as concerts and other entertainment events. The authority is governed by a 21 member board appointed by the North Carolina General Assembly, Wake County, the City of Raleigh, the Chancellor of NCSU, and Wake County Mayor's Association.

AUTHORITY OPERATIONS ARE LIMITED

The authority's responsibilities are largely related to arena capital maintenance and enhancement, which are primarily funded from long-term capital commitments from NCSU, Wake County, and Raleigh, and revenue derived from a naming rights agreement. An affiliate of the Hurricanes (Gale Force Sports & Entertainment or Gale Force) is responsible for the operation of the arena.

STABLE AND STRONG DEBT SERVICE COVERAGE; GOOD LEGAL PROTECTION

Gross receipts of the special tax showed strong growth of 9.1% in fiscal 2013 and 10.8% in fiscal 2014. Growth has been driven by an improved economic climate and heightened hotel occupancy and room rates. The occupancy tax soared by 12.9% in fiscal 2014 while food and beverage tax receipts rose by 8.9%.

Special tax performance historically has been relatively consistent, experiencing only three mild declines since fiscal 1994, the second full year of collections. Food and beverage tax receipts contribute to revenue stability, dropping only once in 19 years in contrast to the more volatile occupancy taxes. Because food and beverage taxes account for the major portion of revenues available for debt service, they serve to further moderate swings in debt service coverage. While food and beverage taxes represented 53% of special tax receipts in fiscal 2014, they comprised 70% of available revenues to the authority. This is attributable to the special tax distribution formula which allocates more of food and beverage tax collections to the authority.

Available special taxes, net of prior distributions, provide extensive coverage of debt service equaling 6.0x MADS in fiscal 2014. Food and beverage tax receipts alone covered MADS by 4.2x. The bonds can handle considerable stress including a 74.2% decline in special taxes while still generating sum sufficient MADS coverage. A 2.0x MADS additional bonds test ensures that satisfactory levels of coverage will be maintained. Pursuant to the inter-local agreement, 85% of excess pledged revenues are distributed to the city, with the remainder allocated to six separate parties to fund various purposes.

SUBSTANTIAL EQUITY CONTRIBUTIONS

The arena was opened in 1999 with significant equity contributions from the NCSU, the state, the county, the city, and the Hurricanes hockey team. The state also leases to the authority the land on which the arena is located for a term of 99 years at an annual rent of \$1.00 per year (the authority estimates the value of the land at \$8 million).

DIVERSE AND BROAD-BASED LOCAL ECONOMY

Wake County (ULTGO rated 'AAA'; Outlook Stable) is part of the Raleigh-Cary metropolitan statistical area (MSA), one of the nation's fastest growing population and employment centers. The City of Raleigh (ULTGO rated 'AAA'; Outlook Stable) serves as the county seat and the state capital. The large government sector has exhibited good stability since 2007, helping to minimize the impact of the recession on overall employment.

The county is home to a portion of the Research Triangle Park, which was founded to diversify the state's economic base and foster high technology jobs. Research Triangle Park is located between three major research universities (Duke, University of North Carolina and North Carolina State), and the park includes 170 global companies including IBM, DuPont, Cisco Systems and Wells Fargo. The county hosts a total of six public and private institutions of higher education, the largest community college system in the state, and three acute care hospital systems.

Over the past 10 years unemployment rates have outperformed the state and nation. The January 2015 rate was a low 4.6%. The Raleigh metro area employment gains rank ninth in the nation and the leader in the state. The county's population has achieved a high level of educational attainment, and income indicators are above-average.

MANAGEABLE CAPITAL NEEDS

The authority's reconciled 25-year capital expenditure plan totaled \$97.4 million as of June 30, 2014, which averages out to a manageable \$4.4 million annually. Management reviews the plan annually in close coordination with the arena tenants. Approximately \$9.8 million in projects were completed by June 30, 2014. Current funding includes capital contributions formally committed by NCSU (\$3.9 million), Wake County and Raleigh (\$17.3 million), and contractually obligated naming rights revenue (\$12.1 million). The authority is required to maintain a capital reserve with a minimum unobligated \$8 million balance. The fiscal 2014 end of year balance was \$15.4 million.

The authority has hired consultants to produce plans for a possible expansion of the arena. The plans are in the early stages but if the authority decides to move forward with the expansion, a future debt issuance would be likely under an updated inter-local agreement.

MINIMAL RETIREMENT OBLIGATIONS

The authority participates in the statewide Local Governmental Employees' retirement system (LGERS) for retiree pension benefits. However, because the authority has only one full-time employee, its contribution requirements are negligible, totaling \$10,114 in fiscal 2014.