OREANDA-NEWS. February 23, 2016. Fitch Ratings has assigned a rating of 'A+' to the following revenue bonds to be issued by the city of Jacksonville, Florida:

--\\$68,760,000 Better Jacksonville sales tax refunding revenue bonds, series 2016.

The bonds will be offered via competitive sale on March 2. Proceeds will advance refund a portion of the outstanding Better Jacksonville sales tax revenue bonds, series 2008 for an estimated net present value savings of \\$6.3 million or 8.9% of refunded par.

In addition, Fitch affirms the 'A+' rating on approximately \\$510.6 million (pre-refunding) of outstanding Better Jacksonville sales tax revenue bonds, series 2008, 2011, 2012, and 2012A.

The Rating Outlook is Stable.

SECURITY

The Better Jacksonville sales tax revenue bonds are secured by a pledge of a discretionary 0.5% sales tax (referred to as the Better Jacksonville Plan infrastructure sales tax or BJP IST). The surtax applies to all transactions in the city that are subject to the state sales tax imposed on sales, use, rentals, admissions, and other transactions. The BJP IST was approved by voter referendum and is effective for a 30 year period terminating Dec. 31, 2030. The bonds are additionally backed by a cash-funded debt service reserve fund (DSRF) totaling \\$48.1 million.

KEY RATING DRIVERS

SATISFACTORY COVERAGE: Coverage of maximum annual debt service (MADS) from unaudited fiscal year 2015 pledged revenues was a satisfactory 1.63x. The existing level of revenue cushion before coverage would fall below 1.0x allows for a decline in pledged revenues more than 2x the actual decrease experienced during the recession.

SALES TAX RECOVERY EVIDENT: Pledged revenues have increased in five consecutive years at a compound annual growth rate (CAGR) of 5.3%, replenishing losses incurred during the recession. The sales tax environment is currently sound reflecting gains in resident employment and lowering of the unemployment rate, continued population expansion, and stabilization in the housing market. Total retail sales in the Jacksonville metro area are forecast to grow by 5.1% CAGR through 2020 according to IHS Economics.

LENIENT ADDITIONAL DEBT PROVISIONS: The bond ordinance establishes an additional bonds test based on a lenient 1.35x coverage threshold. The city has indicated no additional parity indebtedness is anticipated at this time.

RATING CAPPED BY CITY GO: The rating on the BJP IST revenue bonds is capped by the city of Jacksonville's implied unlimited tax general obligation rating, which is currently 'AA' with a Stable Outlook by Fitch.

RATING SENSITIVITIES

ADDITIONAL LEVERAGE: The issuance of additional parity indebtedness resulting in a dilution of MADS coverage, although not expected, could pressure the rating.

SALES TAX PERFORMANCE: The rating is sensitive to shifts in sales tax collections that alter longer-term expectations for MADS coverage and revenue resiliency.

CREDIT PROFILE

The BJP IST was approved by voters at a referendum held in September 2000. Collection of the tax commenced on Jan. 1, 2001 and will terminate on Dec. 31, 2030. The final scheduled maturity for bonds backed by the BJP IST is Oct. 1, 2030. Proceeds of the BJP IST are restricted for capital use and may not be used to fund the general government expenses of the city. The tax is collected and remitted to the city by the state department of revenue on a monthly basis. As a joint city-county form of government, Jacksonville is required to share the proceeds of the tax with other municipalities within its boundaries - pursuant to an interlocal agreement the city will receive 96.9% of the proceeds throughout the term of the BJP IST.

SATISFACTORY DEBT SERVICE COVERAGE

Unaudited pledged revenues for the fiscal year ended Sept. 30, 2015 totaled \\$77.6 million, an increase of 7.9% from the prior year, and the equivalent of 1.63x MADS of \\$47.6 million. The calculation of MADS utilized in Fitch's coverage analysis considers the release of amounts held in the DSRF as a credit against the final debt service payment. The series 2012 bonds feature a large term bond due in the final year of maturity that has the effect of increasing debt service to \\$85.2 million from \\$44.7 million in the year prior.

Current coverage levels provide a good cushion against revenue decline due to changing economic conditions or other unanticipated events. Fitch estimates pledged revenue can decline by 38.6% before coverage of MADS would fall below 1.0x. This level of revenue resilience is equivalent to 2.4x the actual loss incurred during the recession - a 16.3% aggregate decline from fiscal years 2006-2010.

GOOD REVENUE GROWTH TREND

Pledged revenues have now increased five consecutive years at a CAGR of 5.3%, fully restoring recession-period revenue losses. Sales tax revenues are budgeted to increase by 3% in fiscal year 2016, but are up 4.7% through the first four months compared to the same period a year ago. Fitch anticipates continued moderate growth in sales tax revenue in the near term. The city continues to experience stable growth in population with a Census Bureau 2014 estimate of 837,533 a 3.2% increase from 2010. Real disposable personal income and total retail sales in the Jacksonville MSA are forecast by IHS Economics to increase 3.6% and 5.1% per year, respectively, from 2016-2020. The housing market appears to have stabilized with Zillow Group reporting a current median home value in Jacksonville of \\$132,700 or a 6.7% increase on the year, tempered by a slightly high proportion of homes with negative equity or delinquent mortgages.

Jacksonville's unemployment continues to steadily improve registering 4.5% on a preliminary basis in December 2015. 12-month employment growth in the trade, transportation, and utilities sector (3.1%), education and health services (5.3%), and leisure and hospitality (6.3%) are particularly notable. Many of the city's leading employers represent the health care industry, including Baptist Health (8,270 workers), the Mayo Clinic (4,970), St. Vincent's Health (4,000) and Shands Jacksonville (3,500). The Port of Jacksonville continues with major expansion projects that should serve to boost the metro's sizable trade and transportation sectors.

LENIENT ABT TEMPERED BY ABSENCE OF BORROWING PLANS

The bond ordinance allows for the issuance of additional parity indebtedness if pledged revenue in any consecutive 12 month period in the 24 months preceding issuance are equal to 1.35x proposed MADS. The city does not expect to issue additional parity indebtedness at this time, as the bulk of its future debt-financed capital needs are likely to be met through the issuance of additional special revenue bonds backed by its covenant to budget and appropriate non-ad valorem revenue.