OREANDA-NEWS. Fitch Ratings has upgraded the following rating on Burbank Public Financing Authority (authority), California's tax allocation bonds (TABs):

--\$49.2 million TABs, series 2007A (Golden State Redevelopment Project) to 'A-' from 'BBB+'.

The Rating Outlook is Stable.

SECURITY
The TABs are payable from a senior lien on tax increment within the Golden State Project area (the project area) net of the 20% housing set-aside.

KEY RATING DRIVERS

REDUCED LEVERAGE; IMPROVED AV CUSHION: The upgrade to 'A-' reflects improved debt service coverage after a 2015 refunding shifted some parity senior debt to subordinated status. As a result, the assessed valuation (AV) cushion (defined as the AV decline to 1.0x maximum annual debt service (MADS) coverage) improved to a high 57% from an adequate 37%.

CONCENTRATION IN UNSECURED AIRCRAFT: The project area remains vulnerable to concentration in unsecured aircraft at the Bob Hope Airport given the above-average volatility of their valuations. Aircraft valuations have experienced steady declines over the past five years.

CONCENTRATED TAX BASE: The project area tax base is very heavily concentrated among the top 10 taxpayers.

ABOVE-AVERAGE SOCIOECONOMIC INDICATORS: Above-average wealth and educational attainment characteristics offset an average unemployment rate.

RATING SENSITIVITIES

REVENUE AVAILABLE FOR DEBT SERVICE: The rating is sensitive to shifts in pledged tax increment revenues. Without offsetting secured AV increases, downward shifts in unsecured AV resulting in meaningful debt service coverage declines could prompt a negative rating action.

CREDIT PROFILE
The city of Burbank is located just 12 miles northeast of downtown Los Angeles. The city's population in 2013 totaled about 104,709, up 4% from 100,316 in 2000.

The Golden State project area was formed in 1970 and encompasses 1,107 acres or approximately 10% of the city's geographic area. It is largely built out, and includes the Bob Hope Airport (Burbank-Glensdale-Pasadena Airport Authority revenue bonds rated 'A', Stable Outlook by Fitch) and surrounding area adjacent to the Golden State Freeway. The airport's strong regional origination and destination profile within a wealthy and highly populated air trade service area provides a solid economic anchor for the project area.

The project area is well established and enjoys a very high ratio of incremental valuation (IV) to base year AV (6.8x). However, this has not translated to low revenue volatility due to the project area's high exposure to both unsecured IV (37% of total AV in fiscal 2015) and taxpayer concentration, primarily in the form of corporate or general aviation aircraft.

The top 10 taxpayers accounted for a very high 38% of AV and 43% of IV in fiscal 2015.

REDUCED LEVERAGE; IMPROVED AV CUSHION

The upgrade to 'A-' incorporates the significantly reduced leverage on the senior lien due to refunding certain parity series 2003A tax allocation bond maturities to a subordinate basis. No additional senior lien borrowing is possible due to the dissolution of RDAs. The AV cushion increased to 57% from 37% calculated during Fitch's previous review. Projected fiscal 2016 senior MADS coverage likewise increased to 2.44x from 1.68x. Projected fiscal 2016 MADS coverage of all senior and subordinated debt is 1.59x.

CONCENTRATION IN UNSECURED AIRCRAFT

AV has fluctuated in recent years after a period of sustained growth. Fiscal 2013 AV grew 5.5% followed by declines of 3.9% and 1.5% in fiscals 2014 and 2015 respectively, largely due to declines in aircraft values. Each year, the state selects a random, confidential day to conduct an inventory of privately owned aircraft. Privately owned aircraft are more prone to wide fluctuations in value since these assets do not follow fixed flight routes unlike commercial aircraft. The approach to aircraft inventory creates inherent volatility in valuation, dependent on the number of aircraft present on the inventory date.

The project area's unsecured AV related to privately owned aircraft is currently experiencing a downward trend. The fiscal 2015 valuation of \$524.5 million is a record low and represents a 46% decline from the peak value of \$971.9 million in fiscal 2010. Given several years of economic growth, this decline might suggest a shift in the corporate jet environment in the project area as valuations are greatly affected by the type of plane, depreciation, and owners' investment and location decisions.

Positively, secured AV continues to increase and non-aircraft unsecured AV remains stable. There continues to be very good development prospects for the project area, particularly adjacent to the airport. Despite taxpayer concentration and an 18.6% annual level of successful AV appeals on average, Fitch's stress tests indicate that debt service coverage for the senior parity debt could withstand significant losses of both secured and unsecured AV and still remain satisfactory.

ABOVE-AVERAGE SOCIOECONOMIC INDICATORS

Wealth and income indices are solid, with per capita money income 114% and 120% above state and national averages. Educational attainment indicators are also strong. City unemployment rates are historically below state levels but above national levels. The February 2015 rate of 6.3% compared well to the state average 6.8% but remained slightly above the national average of 5.8%.

The City of Burbank has been recognized as the successor agency to the RDA. Recognized obligation payment schedules (ROPS), which include 2015 debt service, have been approved by the oversight board and state.