OREANDA-NEWS. Fitch Ratings affirms the ratings for San Bernardino County Transportation Authority (authority), California's sales tax revenue bonds at 'AA+' as follows:

--$120.8 million series 2014A;
--$91.9 million series 2012A.

The Rating Outlook is Stable.

SECURITY

The bonds are payable from a first lien pledge of the authority's sales tax revenues, net of collection charges. The sales tax revenues derive solely from the voter-approved one-half-cent Measure I sales tax to be collected through 2040.

KEY RATING DRIVERS

SOLID DEBT SERVICE COVERAGE: The 'AA+' rating reflects the authority's minimal exposure to operational risks, the bonds' currently very strong debt service coverage levels, and a sound additional bonds test (ABT) of 2x maximum annual debt service (MADS). Planned issuances are projected to lower coverage to still sound levels.

BELOW-AVERAGE ECONOMIC INDICATORS: The economy exhibits low income and above-average unemployment, and was severely affected by the housing-led recession. Nonetheless, the tax base is well diversified, the housing market is showing signs of stabilization, and sales tax revenues have grown significantly.

BROAD-BASED SALES TAX: The county's sales tax revenues derive from a large, diverse economic base with low concentration levels among the top payers. Although sales tax revenues were heavily affected during the downturn, they have grown significantly for five consecutive years to reach peak levels and the economy's continuing economic recovery suggests revenues are likely to continue growing in the near future.

MANAGEABLE DEBT PROFILE: The authority has a large but flexible long-range capital plan, with related debt issuances that the authority projects will result in debt service coverage consistently above 2.78x.

RATING SENSITIVITIES

STRONG COVERAGE; WEAK ECONOMY: The rating is sensitive to shifts in fundamental credit characteristics including strong debt service coverage and a somewhat weak economy.

CREDIT PROFILE

The authority provides funding for public transit systems, and oversees the construction, maintenance, improvement and operation of roads and highways. The authority does not own or maintain facilities. Given the entity's narrow funding role, Fitch believes the authority has limited exposure to operating risks from related transit agencies or the authority itself.

SOUND DEBT SERVICE COVERAGE, LEGALS

The bonds benefit from a sound legal structure overall and high debt service coverage. Sales tax revenues are transmitted directly from the Board of Equalization to the trustee, with excess revenues flowing to the authority. The bonds do not include a debt service reserve fund.

The ABT is a sound 2x MADS and management projects that future years' debt service coverage will remain high in spite of plans to issue substantial amounts of debt. Management anticipates additional debt issuance will still allow for a strong 2.78x coverage through maturity of all projected bonds. Fitch estimates annual debt service coverage for fiscal 2015 was an extremely high 14.1x.

ECONOMY RECOVERING FROM SEVERE RECESSIONARY CONDITIONS
San Bernardino's economy is somewhat weak overall compared to state and national averages, but enjoys good long-term fundamental drivers of growth. October 2015 unemployment was 6.2% compared to 5.7% and 4.8% at the state and national levels, respectively. Per capita income levels trail the state and nation at 69% and 74%, respectively. Household income levels are somewhat higher, reflective of large family sizes.

The regional economy is well-diversified overall despite pockets of concentration in the transportation and warehousing and construction sectors. Although the local economy performed poorly during the recession, it retains fundamental long-term advantages, including good economic diversity, housing affordability, availability of vacant land, its location along an important distribution route, and its proximity to the large and diverse Southern California employment markets. Further, the post-recession economy has recovered at a moderate pace.

DIVERSIFIED, ECONOMICALLY-SENSITIVE, SALES TAX BASE
County sales taxes derive from a well-diversified tax base, with the top 25 payers making up 21.6% of total sales tax revenues. Sales taxes performed poorly in the recession, with a peak-to-trough contraction of 28% from 2006 - 2010. Sales taxes have since grown to an all-time high, with revenues up a cumulative 44% through fiscal 2015. The authority conservatively budgeted for a 1% decrease in 2016, but actual receipts are up 5.5% in the first quarter year-over-year.