OREANDA-NEWS. Fitch Ratings has assigned a 'AA-' rating to the following city of Tampa, Florida (the city) bonds:

--\$35.7 million non-ad valorem (non-AV) refunding revenue bonds, series 2015.

The bonds are scheduled to sell on a competitive basis on or after July 6. Proceeds will be used to advance refund a portion of utility tax improvement bonds, series 1996 to lower debt service costs.

In addition, Fitch affirms the following ratings for Tampa:

--\$45.7 million occupational license tax refunding bonds, series 2007 at 'AA-';
--\$18.0 million taxable non-ad valorem revenue bonds, series 2011 at 'AA-';
--Implied general obligation (GO) rating at 'AA'.

The Rating Outlook is Stable.

SECURITY

The bonds are supported by the city's covenant to budget and appropriate (CB&A), by amendment if necessary, legally available non-ad valorem (NAV) revenue in an amount sufficient to pay debt service. Other issues payable from the city's CB&A include taxable non-ad valorem revenue bonds and the occupational license tax (OLT) revenue bonds. The OLT revenue bonds are initially secured by a pledge of the city's OLT revenue, derived from a business tax imposed throughout the city.

KEY RATING DRIVERS

HEALTHY RESERVES DESPITE DRAWDOWNS: The 'AA' implied GO rating reflects the city's solid financial position, despite planned spend downs of reserves in each of the past four fiscal years. Balanced operations are projected for fiscal 2015. Available reserves are maintained well above the city's minimum target of 20% of combined general fund and utilities services tax fund spending.

STRENGTHENED ECONOMIC CLIMATE: Tampa remains the hub of economic activity for Florida's Gulf Coast. The local economy continues its recovery, as evidenced by rapid job growth, extensive development activity and a revived housing market.

TAX BASE GROWTH ACCELERATES: Taxable values continue to expand at a quickened pace with preliminary values up 8.3% for fiscal 2016. This follows gains of 6.5% and 6.9% in fiscals 2014 and 2015. The recent growth only partially restores losses in previous years.

ONE-NOTCH RATING DIFFERENTIAL: The 'AA-' rating on bonds secured by non-ad valorem (NAV) revenues is one notch below the implied GO rating due to the absence of any requirement to raise revenues to pay debt service and the mandate that essential services and any debt secured by specific NAV revenue must be paid before CB&A debt service. OLT bonds benefit from an initial pledge of OLT revenues, which historically has been sufficient to pay OLT debt service costs.

RATING SENSITIVITIES

ACHIEVEMENT OF FISCAL BALANCE: The rating reflects Fitch's expectation that the city will return to fiscally balanced operations by fiscal 2015. Results that vary significantly from this expectation could lead to negative rating pressure.

FINANCIAL STABILITY COULD LIFT RATINGS: Reestablishment of balanced financial operations combined with further economic growth could lead to upward movement in the ratings.

CREDIT PROFILE
Tampa is situated on the west coast of Florida in Hillsborough County (the county) and serves as the county seat. Encompassing 116 square miles, the city is the third largest in the state by population with an estimated 352,957 residents as of 2013. Mostly built out, population growth over the past decade has been modest but steady, averaging about 1% annually.

BROAD AND DIVERSE NAV REVENUE BASE

The city's NAV revenue base is broad and diverse, including locally sourced sales-based revenues, state revenue-sharing funds, service charges and license and permit fees. In fiscal 2014, no individual revenue source constituted more than 17% of total NAV revenues. Total receipts have fluctuated in recent years with NAV revenues growing by 3.2% in fiscal 2014. Fiscal 2015 NAV revenues are expected to decline modestly as a result of decreased electric franchise fee revenues and electric utility tax receipts stemming from this past mild winter.

Occupational license tax revenues provide adequate coverage on occupational license tax bonds without additional NAV revenue support; in fiscal 2014 these revenues covered debt service by 1.5x. The current offering refunds debt payable from utility taxes with CB&A debt adding about \$3.6 million of debt service to CB&A MADS. Despite the increase, NAV revenues remain plentiful relative to CB&A debt service, even when general government and public safety expenditures and prior lien debt service are taken into account. Anti-dilution tests limit additional NAV bonds.

FINANCIAL RESERVES REMAIN AMPLE DESPITE DEFICITS

Since fiscal 2010, the city has been utilizing its sizable reserves to offset declines in property tax revenues and ongoing spending pressures. Operating deficits for the combined general fund and utility tax special revenue (utility tax) fund (the city's operating funds) have been reported in each year between fiscals 2011 and 2014, reducing operating fund balance by a total of \$80.7 million or 42%. Despite the drawdowns, management has maintained reserves above the city's minimum reserve policy level of 20% of expenditures

For fiscal 2014, the city reported a combined general fund and utility tax fund operating deficit of \$19.8 million (5.4% of spending). Costs rose due to a 2.5% negotiated employee pay increase and rising health care costs only partially offset by a boost in property and utility taxes. The city's original fiscal 2014 budget had projected a \$7.5 million operating reserve drawdown. Despite the gains in utility taxes, utility tax and franchise fee revenues came in under budget due to less than anticipated enterprise fund activity. In addition, insurance losses were above expectations. The fiscal 2014 unrestricted operating fund balance of \$61.3 million represented 16.6% of spending. However, available reserve levels are understated as restricted balances in the utility tax fund total \$47.4 million and can also be used for general government purposes. When combined with unrestricted general fund balance, available reserves account for a very healthy 30% of operating fund spending.

FISCAL BALANCE RESTORED IN FISCAL 2015

The proposed fiscal 2015 budget is balanced with a projected \$5.9 million deficit in the general fund offset by a \$6.5 million surplus in the utility tax fund. The improved economic environment is anticipated to grow revenues, especially property taxes and other sales-related revenue streams. Another 2.5% wage hike will be partly covered by lower pension contribution requirements as a result of large pension fund investment gains. Based on year-to-date actual results, management is projecting a year-end operating surplus of \$1.2 million.

DIVERSE SERVICE AREA; EMPLOYMENT GROWTH SUBSIDES

Tampa serves as an economic hub for the regional economy. Leading employers include the Hillsborough County School Board, MacDill Air Force Base (AFB), Hillsborough County government and Tampa International Airport.

The local economy, hit hard by the recession, expanded briskly adding over 30,000 jobs (20.8%) between 2009 and 2014. This growth pushed the county's unemployment rate down from 10.9% in 2010 to 5.9% in 2014, below both the state and national standards. The pace of job gains slowed considerably over the first four months of 2015 with average employment up only 0.7% from the same period in 2014. March 2015 employment was a negligible 0.3% down year over year. The unemployment rate of 5.3% remains favorable compared with the state and national rates of 5.5% and 5.6%, respectively.

The city's housing market continues to recover from a steep recessionary decline, although growth rates have eased recently. Housing values increased 53% since reaching a trough in December 2011 and are up 5.2% over the past 12 months, according to the Zillow Group. This growth rate is less than half of the 13% year-over-year increase registered at the time of our last review in June 2014. Zillow forecasts growth to dampen further with values rising by only 1.9% over the next 12 months.

RAPID TAX BASE EXPANSION

Taxable assessed values have lagged those of the housing market. Following five years of declines aggregating in a cumulative 26% drop, tax base trends reversed in fiscal 2014, growing by 6.0%. Values expanded by 7.2% in fiscal 2015, gains in both years driven almost exclusively by the rising level of residential valuations, which represent almost half of all values. Preliminary taxable assessed values for fiscal 2016 show additional growth of over 8%.

The city is experiencing extensive residential and commercial activity including several new hotels as reflected in robust building permit levels. Plans are in the works for a \$1 billion 10 year mixed use development in the city's downtown area, anchored by the relocation of University of South Florida's medical school. Other proposed projects include 1,600 residential units funded by the Tampa Housing Authority and expansion of the city's Riverwalk. Fitch believes that implementation of these development plans will help jumpstart employment growth and further bolster taxable value expansion.

MODERATE DEBT LOAD

Debt levels are manageable, with overall debt at 2.6% of current market value and \$2,321 per capita. The city has no GO bonds outstanding. Debt service carrying costs based on total governmental expenditures are moderate despite rapid principal amortization. Approximately 70% of principal is retired within the next 10 years.

The city's capital needs are relatively modest with proposed funded non-enterprise fund capital projects totaling about \$224.3 million over the next five years. Most of the projects are funded on a pay-go basis. No long-term debt is planned for the next two years. However, the city may take out a line of credit during the first quarter of fiscal 2016 for stormwater and transportation projects primarily payable from stormwater fees and gas tax revenues but backed up by NAV revenues.

MANAGEABLE RETIREMENT OBLIGATIONS

City employees participate in one of two city-sponsored pension plans: the general employees retirement fund, which includes most employees, and the firefighters and police officers pension fund. According to recent reports, both plans report high funding levels at 99.5% for the general employees plan and 93.7% for the firefighters and police officers plan. Under Fitch's more conservative discount rate assumption of 7%, these estimated funding ratios are reduced to a still strong 89.6% and 80.5%, respectively.

The city's pension contribution requirements are manageable, accounting for about 8.7% of fiscal 2014 governmental spending. This is due in part to state contributions to the firefighters and police officers fund, which modestly reduce the city's funding obligation. For retiree health care benefits, the city provides an implicit subsidy by allowing retirees to participate in the city's medical and prescription drug coverage plan at the group rate. The plan is funded on a pay-go basis and the city has not created a dedicated OPEB trust fund. The plan's fiscal 2014 OPEB unfunded actuarial accrued liability of \$66.7 million is comparatively modest, representing about 0.2% of the city's market value.