OREANDA-NEWS. Fitch Ratings affirms the 'A-' rating on the following Town of Marana, Arizona, Tangerine Farms Road Improvement District (the district) outstanding debt:

--$17.3 million improvement bonds, series 2006.

The Rating Outlook is Stable.

SECURITY
The bonds are payable from special assessments imposed upon real property within the district, assessed for expenses associated with infrastructure improvements. The bonds have a first lien on assessed parcels, co-equal to the lien for general taxes. Statutory provisions require the town to make up any deficiency in assessment revenues for debt payments, in the event of a delinquency or nonpayment.

KEY RATING DRIVERS

STABLE ASSESSMENT COLLECTIONS: Assessment delinquencies have been minimal; to date there has been 100% restitution by delinquent property owners to the town within a very short time period.

TOWN COMMITMENT TO DELINQUENCIES: The rating incorporates the town's legal commitment to loan funds to the district in the event of a significant property-owner bankruptcy or assessment delinquency in the improvement district. The maximum exposure to the town (implied unlimited tax general obligation [ULT GO] rating of 'AA-'/Stable Outlook) from annual debt service equals about 5% of the town's fiscal 2016 general fund spending.

TIMELY ASSET DISPOSAL: The asset disposal process is prompt in case of default, although bankruptcy of a property holder could potentially delay the process.

TOWN'S SOUND FINANCIAL PROFILE: Continued general fund operating surpluses and high reserve levels demonstrate to Fitch that the town should be able to meet its obligation to make up any assessment shortfalls if necessary.

HIGH PAYOR CONCENTRATION: At about 75%, the concentration of assessment liability with three large developers remains a credit risk. However, this is offset in part by the substantial value of underlying assets, which makes failure to pay assessments in a timely fashion unlikely.

DISTRICT REMAINS PRIMARILY UNDEVELOPED: The majority of properties in the improvement district are undeveloped. Development has unfolded more slowly than earlier projections given moderately-paced economic expansion since the recession.

RATING SENSITIVITIES

TOWN'S FISCAL POSITION: The rating is sensitive to material changes in the town's sound financial position and solid reserves, and moderate exposure to the town from annual debt service payments of the improvement district.

ASSESSMENT PERFORMANCE: The rating could also change if there is a shift in the stable performance of the assessment structure.

CREDIT PROFILE

PART OF TUCSON MSA

The town of Marana is located in the northwestern part of the Tucson metropolitan area along interstate 10. It is about 25 miles north of Tucson and 90 miles south of Phoenix.

Totaling roughly 1,500 acres, the improvement district comprises large tracts for residential and commercial development. It was formed to facilitate the realignment and extension of Tangerine Farms Road, allowing the road to serve as a major arterial roadway in northwest Marana. Road improvements were completed in 2008.

SATISFACTORY PERFORMANCE OF ASSESSMENT STRUCTURE

Assessments are established assuming proportionate 1x coverage of annual debt service and do not include an allowance for delinquencies, primarily due to the town's role in the timely back-stopping of any delinquencies. Assessments are due one month before scheduled debt service payments.

The bond security mechanism is sound, marked by a prompt foreclosure process on delinquent properties, the town's evidenced ability to provide for modest debt service shortfalls to the district, and the rapid collection of delinquent assessments to reimburse the town. The current delinquency rate in assessment collections was most recently 2.5%, although to date, the district remains 100% collected through all assessment billings.

Delinquent property is subject to public auction no later than 45 days following a missed payment; in practice, taxpayers are given 60 - 90 days to correct the delinquency. The annual assessments represent a first lien on the property on par with the lien for general taxes; these liens are senior to any mortgage lien on the property. If there is no other purchaser, the town is required either to purchase the property (which has not occurred to date) or make the delinquent assessment installment in time to cover debt service.

CONCENTRATION RISK

Concentration of the assessment liability with three large developers (Crown West Realty/Gladden LLC, Cottonwood Properties, and Westcor Marana LLC) remains stable and very high at roughly 75%, although a modest pace of single-family home development has continued since 2012. More recently, Cottonwood Properties realized its first commercial tenant, a medical supply/distribution center (Ventana Medical Systems), within its 100-acre business park. Given that much of the undeveloped property in the improvement district is commercial in nature and contingent upon certain levels of residential development, the timeline for full build-out of the district remains uncertain.