OREANDA-NEWS. Fitch Ratings affirms the following Arcadia Redevelopment Agency (Central Redevelopment Project), California's (the agency) tax allocation bonds (TABs) at 'A+':

--$5.1 million series 2001A (senior lien).

The Rating Outlook is Stable.

SECURITY

The senior lien TABs are payable from a pledge of the agency's tax increment revenue collected within the sole project area, net of the county administrative fee and applicable tax sharing payments to overlapping taxing entities. The senior lien TABs are additionally payable from the housing increment revenue.

KEY RATING DRIVERS

STRONG DEBT SERVICE COVERAGE: Maximum annual debt service (MADS) coverage on the agency's outstanding senior TABs is very high at a Fitch estimated 6.6 times (x). Coverage holds up well under various Fitch stress tests.

CLOSED LIEN AFTER DISSOLUTION: Fitch considers all TAB liens to be closed, as successor agencies (SAs) are not permitted to issue new money TABs. In addition, Fitch recognizes the availability of surplus 20% housing set-aside revenues for non-housing TAB debt service.

SOLID PROJECT AREA, LOCAL ECONOMY: The project area benefits from its location and function as the commercial and retail core of the city of Arcadia. The local economy benefits from its participation in the greater Los Angeles labor markets and features above-average wealth levels and a below-average unemployment rate.

CONCENTRATED, STABLE TAX BASE: High concentration exists within the project area, with the top 10 taxpayers representing 40% of incremental value (IV). Project area assessed value (AV) proved resilient through the recession, and has grown solidly since fiscal 2013.
RATING SENSITIVITIES

SHIFTS IN REVENUE AVAILABLE FOR DEBT SERVICE: The rating is sensitive to shifts in pledged revenue due to tax base changes outside the historical range. Tax base declines that materially reduce pledged revenues could have a negative effect on the rating. Given AV stability and growth trends, Fitch believes such shifts are unlikely in the near term.

CREDIT PROFILE

The city of Arcadia (the city), with an estimated 2014 population of roughly 58,200, is an affluent suburban community located in Los Angeles County about 20 miles northeast of downtown Los Angeles. The presence of a large regional mall supports the city's extensive retail sector. In addition, the Santa Anita racetrack, adjacent to the project area, is a well-known horseracing venue which periodically attracts large numbers of visitors.

RESILIENT AV GROWTH; VERY STRONG COVERAGE
Project area AV only experienced a 0.2% decline in fiscal 2012, followed by four consecutive years of increasing growth. Total AV has increased at a compound annual growth rate (CAGR) of 6.4% from fiscal 2008-2016, providing a backdrop for stable coverage numbers.

Fitch estimates that project area revenues will cover MADS on the senior lien TABs by 6.6x based on fiscal 2016 AV. Coverage stands up well under various Fitch-designed stress scenarios, including the loss of the top 10 taxpayers and no growth in AV. AV would have to drop by more than 80% to lower MADS to 1.0x. Fitch estimates that current coverage of combined senior and subordinate (not rated by Fitch) MADS is approximately 2x based on fiscal 2016 AV.

SOLID PROJECT AREA
The project area encompasses 252 acres, which although small in size, includes much of the city's downtown and central business districts.

Management reports the pipeline for development within the project area is strong. In June 2016, a medical center is scheduled to open with a value of approximately $15.7 million, followed in August by the opening of a major car dealership ($30 million value). These and other new developments under construction will continue to support AV growth as they are completed. Additionally, the Metro Gold Line station is slated to open in March 2016. Management expects the development to spur ancillary developments within the project area over the next several years.

HIGH TAX BASE CONCENTRATION
Taxpayer concentration is high, with the top 10 taxpayers comprising 37% of AV and 40% of IV. Five of the top 10 taxpayers are hotels, which account for 24% of tax increment revenues.

STRONG SOCIOECONOMIC PROFILE
The local economy benefits from its proximity to the broad and diverse labor markets of the greater Los Angeles County area. The city of Arcadia is characterized by above-average wealth levels, and an unemployment rate which remains well below state and national averages.

REDEVELOPMENT DISSOLUTION - NEUTRAL TO POSITIVE IMPACT
In May 2014, Fitch refined its California RDA analysis pertaining to the beneficial impact of dissolution legislation (AB 1X 26). Fitch now considers TAB liens to be closed and surplus housing revenues to be available for non-housing TAB debt service. Although uncertainties remain, Fitch views the continued presence of closed TAB liens and surplus housing revenue availability as more likely than not to remain a feature of California TABs.

COMPLIANCE WITH DISSOLUTION PROCEDURES
Dissolution-related (AB 1X 26) risks are lessening as management is continuing to adhere to indenture requirements, necessary revenue tracking is in place, and timely and robust continuing disclosure reports are being provided. Since dissolution, the successor agency's procedures to manage dissolution have become well-established, lessening operational risks.