OREANDA-NEWS. Fitch Ratings has assigned a 'AA-' rating to the following West Palm Beach Community Redevelopment Agency's, Florida's (CRA) tax increment revenue bonds:

--$70.57 million (city center community redevelopment area) series 2015.

The bonds are scheduled for sale on a negotiated basis on July 14. Proceeds will be used to refund most of the outstanding series 2006A tax increment revenue bonds.

In addition, Fitch affirms the following rating:

--73.3 million outstanding tax increment revenue bonds, series 2006A at 'AA-'.

The Rating Outlook is Stable.

SECURITY

The bonds are payable from a lien on tax increment revenues generated within the City Center Community Redevelopment Area (CCCRA or project area), net of prior CRA commitments to the CityPlace Community Development District (CDD) and a private developer. Also pledged are tax increment revenues derived from the West Palm Beach Downtown Development Authority, a separate taxing unit, located entirely within the borders of the CCCRA.

KEY RATING DRIVERS

STRONG DEBT SERVICE COVERAGE: Maximum annual debt service (MADS) coverage on the CCCRA's outstanding senior lien tax increment revenue bonds, net of prior lien commitments, is strong at 3.5x. Coverage holds up well under various Fitch stress tests.

CONCENTRATED BUT EXPANDING TAX BASE: The project area is highly concentrated with the top 10 taxpayers representing approximately 32% of incremental value (IV). Project area assessed values (AV) are sizable at about $2 billion and have grown for the third straight year at a stepped up pace.

SOLID PROJECT AREA, LOCAL ECONOMY: The CCCRA benefits from its location and function as West Palm Beach's (the city's) downtown commercial core, which features a diverse mix of commercial, residential and government activities. The local economy continues to improve, and features above-average wealth levels and an unemployment rate below the national level.

ADEQUATE LEGAL PROVISIONS: Fitch considers the 1.50x MADS additional bonds test (ABT) and debt service reserve fund requirement fulfilled by a surety to be lenient. Issuance plans are limited and not expected to change the CCCRA's overall debt profile.

LIMITED OPERATING RISK: CRA expenditures are restricted to projects and services within the redevelopment project area. The CRA has no full-time employees and operations are outsourced to a private manager.

RATING SENSITIVITIES

REDUCED COVERAGE: Steep declines in the CCCRA's assessed values and/or significant, unexpected additional leveraging of tax increment revenues reducing coverage could lead to negative rating action.

CREDIT PROFILE

The CCCRA, established in 1984, is one of West Palm Beach's (implied GO rated 'AA+' with Stable Outlook) two community redevelopment areas, and encompasses approximately 940 acres including much of the downtown core of the city. The West Palm Beach Downtown Development Authority (DDA) is a separate taxing district located entirely within the CCCRA.

PROJECT AREA IS DIVERSE AND HIGHLY DEVELOPED

In addition to a diverse base of commercial and residential structures, the CCCRA includes CityPlace, a popular mixed-use development featuring upscale shopping and entertainment (CityPlace CDD special assessment/revenue bonds rated 'A' by Fitch). The CCCRA is densely developed as reflected in its $2 billion tax base, which represents 22% of the city's taxable value on only 3% of its total acreage.

Management reports the pipeline for development within the CCCRA is robust, with numerous projects planned, approved or under construction. These projects include a 400-room convention center hotel and parking garage slated to open in 2015, a planned 322 unit luxury rental complex called Broadstone at Clematis and a 51,000 square foot expanded Restoration Hardware store across the street from CityPlace. These and other developments are expected to support CCCRA AV stability and growth over at least the near term.

CCCRA ACTIVITIES FUNDED MOSTLY BY TAX INCREMENT REVENUES

The CCCRA's chief funding source is property tax increment revenues levied by the city, Palm Beach County (the county), and the DDA. The city and county levied 8.35 and 4.78 mills, respectively, in fiscal 2015; the third straight year at that level. Both levies are comfortably below the 10 mill cap, and generated 95% ($22.5 million) of combined pledged revenues in fiscal 2015. The DDA levies an additional 1 mill within its area which generates about $1.1 million or 5% of combined pledged revenues.

Project area AV has grown in each of the past three fiscal years at an accelerating pace, going from 0.6% in fiscal 2013 to 5.9% in fiscal 2015. Preliminary indications for fiscal 2016 show an additional increase of 12%. This spurt of growth follows three consecutive years of recession-driven declines aggregating to about 20%. Despite the fall-off, the downturn in the CCCRA's tax base was less severe than many Florida localities including the city's AV which fell by 36% between fiscals 2009 and 2013.

WIDE DEBT SERVICE COVERAGE

Coverage of senior lien debt service by CCCRA tax increment revenues is robust at 3.2x and 3.5x for fiscals 2014 and 2015, respectively. Pledged tax increment revenues and above-referenced coverage figures are net of prior obligations to CityPlace CDD and a private developer, which totaled $3.8 million in fiscal 2015 or about 16.7% of total revenues. The maximum obligation to CityPlace CDD is $4.2 million beginning in fiscal 2017 through final maturity in fiscal 2026. The CDD is not permitted to issue additional parity debt.

Coverage stands up well under various Fitch-designed stress scenarios. CCCRA AV could drop by 50% and still generate sufficient tax increment revenue to cover senior lien MADS by at least 1.0x. CCCRA officials are contemplating the issuance of $30 million of additional tax increment revenue bonds within the next two years in order to construct a mixed-use building in place of an existing parking garage. Senior bond debt service coverage including the additional debt is expected to remain ample.

HIGH TAX BASE CONCENTRATION
The CCCRA tax base exhibits high concentration as the top ten taxpayers, primarily office properties, account for 32% of IV. The largest taxpayer represents 7.5% of IV. Concerns about concentration are somewhat mitigated by the diversity of tenants in the office properties; however, single site risk still exists.

LIMITED OPERATIONS

CRA operations are limited to projects within the CCCRA and another nearby project area. At the beginning of 2014, the CRA outsourced its operations which had previously been performed by city employees to a private firm. With no full time employees, the CRA is not burdened with retiree pension or other post-employment benefit liabilities.

STRONG SOCIOECONOMIC PROFILE

The city incorporates a population of slightly more than 100,000 and benefits from its role as the county seat for Palm Beach County and regional commercial center. The city is characterized by above-average wealth levels, with per capita personal income 114% and 106% of the state and national averages, respectively. The unemployment rate continues to recover, and is now below the national rate and on par with the state.