Fitch Rates Chesterfield Valley Transportation Devel Dist, MO Sales Tax Rev Bnds 'A-'.

CHICAGO -- Fitch assigns an 'A-' rating to Chesterfield Valley Transportation Development District (the district), Missouri's approximately $22,420,000 transportation sales tax revenue bonds, series 2006, with Piper Jaffray & Co. serving as financial advisor. The bonds are scheduled for negotiated sale through A.G. Edwards & Sons, Inc., on Oct. 3, 2006. The Rating Outlook is Stable.

Dated as of delivery, the bonds pay semiannual interest commencing April 15, 2007. The bonds are secured by revenues generated from a 0.375% transportation district sales tax, which gained voter approval in February 2006. Sales tax receipts used for debt service are subject to annual appropriation by the district. Furthermore, until the debt for an underlying tax increment finance district (TIF district) is retired, by state law 50% of transportation district tax receipts are allocated to the TIF. The City of Chesterfield (the city) will collect the sales tax for the district under an intergovernmental agreement between the two entities. Proceeds will finance the construction of road and right-of-way improvements, a public easement acquisition, a mass transit needs study, and construction of a trail/bikeway system. Early redemption provisions will be established at the time of pricing, including a provision that allows an annual redemption of bonds from excess revenues generated by the district.

The 'A-' rating reflects the strong area demographics, diverse mix of retailers within the district, and the flexibility in the debt structure afforded by the special redemption features. Credit concerns include the diversion of 50% of the transportation district sales tax to the underlying TIF district until the TIF debt is repaid, the economic sensitivity of the sales tax, and the limited nature of the district. The Stable Rating Outlook is based on the established nature of the district, history of strong retail sales, and the favorable prospects for future growth.

The district encompasses a 4,700-acre area within the City of Chesterfield, just south of the Missouri River and bisected by Interstate 64. The circuit court of St. Louis County declared the district organized in November 2005. The district's 0.375% sales tax, which supports the bonds, took effect March 1, 2006. Use of the sales tax for debt service is subject to annual appropriation by its governing board. However, Fitch believes several factors mitigate the risk of non-appropriation: as a separate unit of government, all monies generated from the sales tax must remain with the district; and Missouri law prohibits the repeal or amendment of the sales tax which would impair the district's ability to meet its obligations while bonds are outstanding.

Overlapping the district is a TIF district created in 1994 to encourage development within the city. Under Missouri law, 50% of the district's sales taxes collected within the TIF district stay with the TIF district to retire outstanding TIF obligations. The TIF district issued $50.9 million in TIF bonds in 2002, with current outstanding principal of $22.8 million. Based on current and projected incremental revenues, the TIF district anticipates retirement of the TIF bonds in full no later than 2008. The TIF district does not have the ability to issue any additional debt. The district will garner the full amount of sales taxes upon the expiration of the TIF district's outstanding obligations.

The district serves the St. Louis metropolitan area and is one of the largest contiguous retail developments within the area. Located within the district are several retail complexes, with a large, diverse mix of retailers, including Target (rated 'A+' with a Stable Outlook by Fitch), Wal-Mart (rated 'AA' with a Stable Outlook by Fitch), Sam's Club, Lowe's (rated 'A+' with a Stable Outlook by Fitch), and The Home Depot (rated 'AA' with a Negative Outlook by Fitch). The 25 largest sales tax generators accounted for 63% of sales taxes generated within the district in 2005, indicating an above-average level of diversity for a district of this type.

Taxable sales within the district increased to $685 million in 2005 from $273 million in 2001, representing an average annual increase of over 25%. Several additional developments in the district are underway, with growth anticipated to continue in the district over the next few years, as approximately one-quarter of land within the district remains to be developed. Assuming the TIF bonds are retired in 2008, and with taxable retail sales held constant at 2005 levels, coverage for the bonds should exceed 1.3 times (x) over the course of the stated maturity schedule. The district anticipates retiring the bonds well before the stated maturity through the use of annual surplus revenue as allowed by the extraordinary redemption provisions.

The City of Chesterfield is situated approximately 22 miles west of downtown St. Louis in St. Louis County (general obligation bonds rated 'AAA' by Fitch). The city's per capita money income of $43,288 equals 157%, 217% and 201% of the county, state and national averages, respectively. City residents benefit from a strong local employment base and proximity to employment centers throughout the St. Louis metropolitan area. As a result, the city's July 2006 unemployment rate of 3.0% is less than the county (4.7%), state (4.8%), and nation (5.0%), which is historically consistent.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public 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.