2008-11-09 07:12:04 -

- Fitch Ratings assigns an 'AA-' rating to South Jordan City's (the city), Salt Lake County, Utah sales tax revenue bonds as follows:

--$10.4 million, series 2008;

--$9.9 million, series 2006.

In addition, Fitch affirms the city's outstanding sales tax revenue bonds, series 2001 and excise tax road bonds, series 2000 at 'AA-'.

The Rating Outlook

is Stable.

The series 2008 bonds are expected to sell via negotiation on or about Nov. 18, 2008. The sales tax bonds are secured by pledged sales and use tax revenues. The proceeds will finance municipal building construction, road repairs, and recreation projects.

The 'AA-' rating reflects strong coverage of debt service by pledged revenues and the city's general credit characteristics which include a sound financial position, low per capita debt levels, and an increasingly diversified local economy. There has been substantial growth in the city's population and retail sales base. Sales tax revenue growth has been strong and is projected to continue increasing despite the current economic slowdown. Debt service coverage is solid and can withstand significant stress tests.

The city, with 48,000 residents, is located along the I-15 corridor, 17 miles south of Salt Lake City. While primarily residential, the city has a growing mix of commercial, retail, and light industrial businesses spread throughout it. Due to its location within the Salt Lake City metropolitan area's employment market and the availability of developable land, the city has benefited from population growth averaging 7.3% per year since 2000, which is significantly higher than in Salt Lake County as a whole (1.7%) and the state (2.5%). Tax base growth has also been strong at an annual average of 20% since fiscal 2002. City residents enjoy above-average median household incomes and a consistently low unemployment rate compared to county, state, and national unemployment rates.

Security for the parity sales tax revenue bonds, series 2001, 2006, and 2008 is provided by a first lien on the city's 1% local sales and use tax receipts. In addition, the city has an internal finance plan to use tax increment revenues from the city's Redevelopment Agency to pay for a portion of the sales tax revenue bond debt. The city's sales tax revenues have risen an average of 16% per year since fiscal 1996. The city projects that sales tax receipts will continue to increase by 11% in fiscal 2009 and 23% in fiscal 2010, due to specific new retailers coming on-line, and then at an average rate of 5% per year thereafter from population growth and sales tax growth from existing businesses alone. These growth projections may be somewhat aggressive in the short-term, given the current economic downturn. Legal covenants are sound, including a strong 2.0 times (x) additional bonds test. The coverage level of maximum annual debt service (MADS) is solid (3.3x) based on fiscal 2007 sales tax revenues. Even under an extreme stress test whereby sales tax revenues decrease by 5% per year from fiscal 2008 onwards, Fitch has determined that minimum MADS coverage would not drop below 1.4x assuming no additional parity debt is issued.

Financial operations are sound, evidenced by a good fiscal 2007 unreserved general fund balance of $4.6 million or 17% of spending. Debt levels are low as a result of pay-as-you-go financing of capital projects and above-average principal amortization. Net direct debt, including this issue, is a low $1,240 per capita or 0.9% of market value. Overall net debt is a still low $1,804 per capita or 1.3% of market value. The city has no plans to issue additional parity debt in the near term.

Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bonds ratings which, if adopted, may result in an upward revision of this long-term rating (see Fitch research "Exposure Draft: Reassessment of the Municipal Ratings Framework"). Fitch has deferred its final determination on municipal recalibration due to market conditions and plans to revisit the recalibration in the first quarter of 2009 (see press release "Fitch Defers Final Determination on US Municipal Ratings Recalibration," dated Oct. 7, 2008).

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance, and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings, San Francisco
Alan Gibson, 415-732-7577
Amy Doppelt, 415-732-5612
Scott Monroe, 415-732-5618
or
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Email: cindy.stoller@fitchratings.com