OREANDA-NEWS. Fitch Ratings has affirmed the following ratings for Riverton, Utah (the city):

--\$34.938 million franchise and sales tax revenue bonds, series 2004A, 2007, and 2013, at 'AA';
--Implied unlimited tax general obligation (ULTGO) bond rating at 'AA'.

The Rating Outlook is Stable.

SECURITY
The bonds are payable from an irrevocable first lien on the city's franchise tax and 1% local sales and use tax. The franchise tax revenues include energy sales and use levied at the maximum rate of 6%, telecommunication license taxes levied at the maximum 3.5% rate, and cable franchise fees levied at the maximum 5% rate.

KEY RATING DRIVERS

SALES TAX DEPENDENCE: The city is heavily reliant on sales tax revenues for its operations. There is moderate sales tax payer concentration.

HIGH GROWTH ENVIRONMENT: The city is one of the fastest growing municipalities in the state. Significant commercial and residential development continues to add to the revenue base. Property assessed value (AV) has substantially rebounded from recessionary times. Home values have also begun to stabilize.

SATISFACTORY REVENUE RAISING FLEXIBILITY: The city has flexibility to levy a property tax but levies all other taxes at the maximum allowable rate.

AMPLE RESERVE LEVELS: Satisfactory unrestricted general fund reserve levels are bolstered by substantial available reserves in capital projects fund.

LONG-TERM LIABILITY PROFILE STRENGTH: Overall debt and carrying cost levels are expected to remain low. The city funds 100% of its pension ARC to the well-funded statewide system and does not offer other post-employment benefits (OPEB).

ROBUST DEBT SERVICE COVERAGE: The revenue bond rating is on par with the ULTGO rating given the solid coverage and a satisfactory additional bonds test and reflects the city's reliance on sales and use tax revenues for ongoing operations.

RATING SENSITIVITIES

STRONG FUNDAMENTALS: The rating is sensitive to shifts in the city's strong financial operating cushion and heavy reliance on sales tax revenues. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

Riverton is a bedroom community located 20 miles south of Salt Lake City with access to Interstate-15 and employment centers. Its population has grown by more than 63% since 2000 to reach an estimated 40,921 in 2013 and is expected to expand by approximately 30% in the coming decade.

WEALTHY BEDROOM COMMUNITY

The city's median household income is 155% of the national average, and 140% of the state level. The unemployment rate, a low 2.9% in March 2015, compared favorably to a national average of 5.6%. Major employers include the Jordan School District, the Church of Jesus Chris of Latter-day Saints, Intermountain Healthcare Hospital, and various national retailers.

The city has begun development on the Western Riverton Commercial District, a retail and corporate business park that is anticipated to bring over 5,000 new jobs to the area. The city expects the development to add significant value to the sales tax base. It is scheduled to partially open in 2017, and will be fully operational in 2018. Fitch believes that additional growth and diversification of the city's revenue base would be a positive credit factor.

REBOUNDING HOUSING MARKET

The tax base is recovering from a 21% loss in taxable AV during the national housing downturn. Taxable AV increased approximately 6% in fiscal year 2014 and increased an additional 7% in fiscal year 2015. According to Zillow, after experiencing a 3.7% decline over the past year, median home prices are expected to increase 2.8% over the next year. The city is expecting to issue building permits for 125 single-family developments and 247 multi-family developments at the end of this year. Fitch believes these positive trends bode well for future tax base growth.

SALES TAX DEPENDENCE
Economically sensitive sales taxes comprise an elevated 64% of general fund revenues in fiscal 2014, and increased 4% over the prior year. Sales taxes revenues grew rapidly until fiscal 2009, when recessionary weakness resulted in two years with virtually no growth. Revenues have picked up by 3-5% annually in the last four fiscal years and are expected to increase 2.4% in fiscal 2015. The sales and use tax is levied at the maximum 1%, collected by the state, and remitted to the city monthly base on a redistributive formula that takes into account point of sale and population. Fitch expects sales tax revenue to continue to be influenced by the city's population growth patterns.

The city ceased levying property taxes as of fiscal 2012 and transferred law enforcement expenses to the Salt Lake Valley Law Enforcement Service Association (SLVLESA) to capture future cost savings. Both SLVLESA and the Salt Lake Valley Fire Service Area levy a separate property tax on city residents for public safety services. The city retains full discretion to levy property taxes in the future but currently levies franchise, sales and use taxes at their maximum rates. While the city is not in need of these additional funds, a one-mill property tax levy would generate \$2.2 million in additional revenues.

HEALTHY FINANCIAL CUSHION

Financial operations have yielded strong reserves. Management has continued to temper spending by capping employee defined contribution pension and healthcare costs. In compliance with Utah's 25% maximum general fund balance limit, the city maintained unrestricted fund balances between 13-16% of general fund expenditures from fiscal 2011 to fiscal 2014. The unrestricted general fund balance was \$1.4 million (or 14.3% of expenditures and transfers out) at the end of fiscal 2014.

The city also maintains significant reserves in its capital project fund, adding to financial flexibility. The city collects approximately \$2.5 million a year in franchise taxes, which were equivalent to 30% of general fund revenues in fiscal 2014. These are deposited in a capital projects fund. Although primarily designated for economic development, reserves in this fund are available to the general fund by 4/5th of council votes. At the end of fiscal 2014, \$14 million (170% of general fund spending) was available in the capital projects fund.

ROBUST DEBT SERVICE COVERAGE

Debt service coverage is strong at 3.6x in fiscal 2014. Fiscal 2014 revenues cover MADS (which occurs in fiscal 2027) by 3.1x. MADS coverage would drop to 1.6x even under the stress scenario in which revenues decline by 5% every year, assuming no additional debt. Fitch views the 2x additional bonds test as providing sound protection against overleveraging.

LONG TERM LIABILITY PROFILE A CREDIT POSITIVE

Overall debt is low, at \$1,613 per capita and 2.1% of market value, and expected to remain so given the lack of sizeable capital needs. All of the city's direct debt is in the form of franchise and sales tax revenues bonds. Amortization is slow with 26.7% retiring in 10 years.

The city participates in the well-funded Utah Retirement System and pays 100% of actuarially required contributions. Other post-employment benefits (OPEB) are not offered by the city. Total debt and pension carrying costs were a low 13% of total governmental spending.