OREANDA-NEWS. Fitch Ratings has affirmed the following Allegheny County, PA Redevelopment Authority (the authority) tax increment revenue bonds:

--$7.1 million tax increment financing (TIF) refunding bonds (Waterfront Project), series 2007 A & B, at 'A'.

The Rating Outlook is Stable.

SECURITY
The bonds are secured by tax increment revenue generated from the parcels located within the project area. Each taxing unit is responsible for the levy and collection of tax revenue from the project area (the authority has no taxing power). Pursuant to the TIF agreement, each taxing unit has established a segregated account to be held by the trustee into which tax revenue with respect to parcels within the project area is deposited. A cash-funded debt service reserve fund also supports the bonds.

KEY RATING DRIVERS

MATURE, DEVELOPED PROJECT AREA: The project area is fully developed, assessed value (AV) growth has exceeded original projections, and occupancy rates are satisfactory.

HIGH TAXPAYER CONCENTRATION: Leading taxpayers continue to be highly concentrated within a predominantly commercial project area.

STABLE ASSESSED VALUATION AND TAX REVENUES: AV declines have been modest and tax increment revenues stable with no expected material negative impact on revenues from pending appeals.

IMPROVED, STRONG COVERAGE: Debt service coverage levels are expected to remain strong through bond maturity.

SOUND ECONOMIC INDICATORS: The economic characteristics of the immediate retail service area are solid with average income levels and below-average unemployment.

RATING SENSITIVITIES

COVERAGE DECLINES: Fitch expects annual debt service coverage to remain strong despite concerns over the small, concentrated project area and revenue raising constraints, which Fitch believes limit the rating to its current level. Significant declines in coverage could prompt a negative rating action.

CREDIT PROFILE

The project area, referred to as the Waterfront at Homestead, is a regional open-air shopping mall divided into four development areas that contain retail, residential, and office space properties across 265 acres. The project site, the location of the former U.S. Steel Homestead Works, is located within close proximity of downtown Pittsburgh (GOs rated 'A' by Fitch), some of the more affluent communities in the greater Pittsburgh area, and the university communities of the University of Pittsburgh, Duquesne University, and Carnegie Mellon University.

The region's large health care and education presence have helped sustain employment levels. The 2014 MSA unemployment rate averaged 5.6% compared to the state at 5.8% and the nation at 6.2%. The county's per capita income averages are slightly higher than the national average.

A MATURE, DEVELOPED PROJECT AREA

Project development has been phased in since 1999 with all tax parcels considered developed since January 2007. In 2012 AV totaled approximately $242.9 million, or 30x the base year value in 1998, exceeding original projections for build-out at $179 million. Following a countywide revaluation in 2012, AV increased 39% in 2013 but fell 12% in 2014 due to appeals. Remaining appeals are minimal (5% of revenues). Total tax revenues for 2015 are expected to be similar to 2014 levels, supported by stable AV and millage rates established by each of the participating taxing units to fund their respective general government operations.

STRONG DEBT SERVICE COVERAGE

Coverage of annual debt service in 2014 was strong at 4.22x. Coverage of maximum annual debt service (MADS; which is in 2017) from fiscal 2014 revenues is strong at 3.88x. Dilution of coverage is not expected, since no additional bonds are permitted under the Indenture. Bond amortization is rapid with the final maturity in 2018. Coverage is vulnerable to tax rate changes and collection delinquencies but the risk is minimal as no further revaluations or significant downward millage rate changes are expected during the life of the bonds.

A cash-funded debt service reserve included approximately $1.5 million (71% MADS) as of June 2015.

HIGH TAXPAYER CONCENTRATION
Taxpayer concentration remains high as the top 10 taxable parcels account for 49% of 2014 total tax increment revenue. Several parcels contain multiple tenants and one parcel includes a portion of a 235-unit apartment complex which serves as a minor offset to the concentration concern. The largest single taxpayer, accounting for 8.6% of 2014 revenues, is Power Center/Marshalls to PetCo and the top three taxpayers comprise a high 21%. According to the authority, project occupancy is strong across property classification and turnover has been low.

MINIMAL VALUATION APPEAL RISK
The authority is not aware of any valuation assessment appeals that would materially impact future tax increment collections. According to the authority, refunds owed as a result of the successful appeal of a property's assessment are not reimbursed from tax increment revenues, but are the responsibility of the participating taxing units. Strong debt service coverage mitigates the impact on credit quality of possible downward revisions to AVs as a result of any successful appeals. Fitch's rating assumes annual coverage will remain strong.