Fitch Rates Alameda County Trans Commission, CA Sales Tax Rev 'AAA'; Outlook Stable

SAN FRANCISCO--()--Fitch Ratings has assigned a 'AAA' rating to the following bonds issued by the Alameda County Transportation Commission, CA (the commission):

--$145.9 million sales tax revenue bonds (limited tax bonds), series 2014.

The bonds are expected to sell via negotiation on or about the week of Feb. 10, 2014. Proceeds will be used to fund various projects, including the BART Warm Springs Extension, Bart Oakland Airport Connector, Route 84 Interchange, and the I-580 Corridor Improvement projects.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by a first lien on the commission's one-half-cent sales tax collected in the County of Alameda.

KEY RATING DRIVERS

STRONG COVERAGE, CLOSED LIEN: The 'AAA' rating reflects robust coverage on the proposed sales tax revenue bonds, the closed lien structure, and short maturity limiting the exposure to collection volatility.

HEALTHY SALES TAX BASE: Pledged revenues are an existing county-wide voter-approved sales tax supported by a healthy economy. Receipts have renewed growth and surpassed prior highs after a large recessionary decline.

LIMITED OPERATING PRESSURES: Sales tax revenues are dedicated to specific capital projects and programs, and face minimal pressure from transportation operations or other potential uses.

LARGE AND DIVERSE ECONOMY: Alameda County (implied GO rated 'AA+') is part of the large and diverse bay area economy that has proven resilient in the wake of the economic downturn.

RATING SENSITIVITIES

The rating is sensitive to shifts in fundamental credit characteristics including the strong debt service coverage. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.

CREDIT PROFILE

The commission is a joint powers authority formed to plan, fund and deliver significant transportation projects and programs throughout the county. It functions solely as a capital financing agency, with minimal operating responsibilities. Funding priorities include major capital projects, such as Bay Area Rapid Transit (BART) extensions and stations, highway infrastructure, and street improvements.

The commission is governed by 22 elected members representing all county supervisorial districts, cities, BART, and Alameda -Contra Costa (AC) Transit. It was established in 2010 by a merger of the Alameda County Transportation Improvement Authority (ACTIA), itself a successor to the Alameda County Transportation Authority (ACTA), and the Alameda County Congestion Management Agency (ACCMA).

STRONG COVERAGE/CLOSED LIEN

Debt service coverage on the sales tax bonds, which have an eight-year maturity, is strong at 4.3x maximum annual debt service (MADS). Coverage remains healthy under various stress scenarios, including a decline in sales tax revenues of 76.6% - nearly four times the largest historical decline - to equal 1.0x MADS. The indenture prohibits the commission from issuing any additional parity debt apart from refunding bonds (without extension of final maturity), which significantly strengthens the credit quality.

HEALTHY SALES TAX BASE

Pledged sales taxes exhibit an overall positive trend. Tax receipts increased a combined 28% over the last three years to a peak of $121 million in fiscal 2013 following a decline during the recession of 12.9% and 6.8% in fiscals 2009 and 2010, respectively. For the first quarter for fiscal 2014, receipts increased 2.5% over the same period the prior year.

Collection of the tax began in 1987 with voter approval of Measure B, a county-wide one-half-cent sales tax. In 2000, voters approved a 20-year extension of Measure B with an approval rate of 81.5%. A 2012 ballot measure that would have added a half-cent and extended the tax in perpetuity received 66.53% of the vote, just under the two-thirds majority necessary to pass (66.67%). The commission intends to place a measure on the November 2014 ballot to increase the tax by a half-cent for a period of 30 years. However, payment of debt service on these bonds is solely secured by the 2000 Measure B sales tax revenues.

The commission's funding requirements to date have been met on a pay as you go basis. As of June 2013 the commission reported approximately $204 million in cash available for capital and programmatic expenses. These funds are also available to pay debt service on commission debt, but are not pledged to bondholders.

SOUND LEGAL PROTECTIONS

Measure B collection of the sales tax sunsets March 31, 2022, which is the same month as the scheduled final maturity date of the series 2014 bonds. The tax is collected by the Board of Equalization and remitted directly to the Trustee. No additional parity bonds are permitted apart from refunding bonds. The Commission may issue subordinate bonds. There is no debt service reserve associated with this series.

MINIMAL OPERATING PRESSURES

The commission's funding commitments associated with the sales tax receipts are restricted to those specified in Measure B, and typically provide only a portion of project costs limiting its exposure to potential project cost overruns. In addition, the commission is restricted by the 20-year Transportation Expenditure Plan established by ordinance to allocating no more than 38.3% of Measure B sales tax revenues to capital projects with the remaining revenues allocated to various programmatic expenditures allocated on a formula basis and through competitive grants to local jurisdictions, including mass transit, local streets and roads, and bike and pedestrian safety. These features protect the commission's sales tax revenues from excess commitments or diversion.

STABLE, DIVERSE ECONOMY

The county is one of five making up the San Francisco metropolitan statistical area (the MSA), and benefits from a strong regional economy and employment gains in neighboring San Francisco and Silicon Valley, with broad-based gains in nearly all industries led by the volatile technology sector. The largest county employers are governmental, led by the University of California, Berkeley, as well as medical centers, though many residents commute across the bay area for employment. The county's unemployment rate of 6.8% as of November 2013 bettered the state and national averages. County incomes are above state and well above national averages, although notably lower than the MSA.

The county's taxable assessed value declined only 4% during the downturn and is currently at its historic peak after increasing a combined 7.7% in the three years ending fiscal 2014. Home values reported by Zillow, though still 13.75% below their prerecession peak, increased 27.5% year-over-year as of October 2013.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=813274

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Contacts

Fitch Ratings
Primary Analyst
Shannon Groff, +1-415-732-5628
Director
Fitch Ratings, Inc.
650 California Street, 4th Floor
San Francisco, CA 94108
or
Secondary Analyst
Stephen Walsh, +1-415-732-7573
Director
or
Committee Chairperson
Michael Rinaldi, +1-212-908-0833
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Shannon Groff, +1-415-732-5628
Director
Fitch Ratings, Inc.
650 California Street, 4th Floor
San Francisco, CA 94108
or
Secondary Analyst
Stephen Walsh, +1-415-732-7573
Director
or
Committee Chairperson
Michael Rinaldi, +1-212-908-0833
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com