NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns an 'A+' rating to Centennial Authority, North Carolina's (the authority) estimated $39,670,000 of revenue refunding bonds, series 2009. The bonds are scheduled for negotiated sale on Aug. 20, 2009, In addition, Fitch upgrades from 'A' to 'A+' the rating on the authority's outstanding hotel tax revenue bonds, series 1997, which are expected to be refunded in full with proceeds of the series 2009 bonds. The Rating Outlook is Stable.

The 'A+' rating reflects solid growth in the pledged revenue streams, ample historical and projected debt service coverage levels, as well as the service area's stable and growing economy. The upgrade of the series 1997 bonds to 'A+' from 'A' recognizes the strength and stability afforded by the combination of two distinct pledged revenue sources. The bonds are secured by the authority's receipt of a portion of the room occupancy tax and the prepared food and beverage tax from the city of Raleigh and Wake County, and investment earnings on the tax payments as well as on the funds and accounts established under the indenture. Pursuant to an interlocal agreement between the city and the county, after payment of debt service, 85% of excess pledged revenues are distributed to Raleigh, with the remainder allocated to six separate parties to fund various purposes.

The county includes the city of Raleigh, the state capital, and benefits from its proximity to Research Triangle Park, a campus of 170 biotechnology firms and 42,000 employees; major universities; and further depth and breadth in the pool of employers. The diverse economic base includes state and local government, health care, financial services, higher education, and retail trade, as well as high-technology and traditional manufacturing. The 8.8% county unemployment rate (preliminary) for June 2009, while higher than the 4.7% of June 2008, is still below state and national averages. Wealth indicators across the county are above average, with median household income 24% above the national level. Continuing commercial and civic development activity across Wake County enhances prospects for sustained growth in the pledged revenues, although Fitch recognizes that inherent concerns exist with economically sensitive revenue streams.


Between fiscal years 2003 and 2008, gross receipts on the 6% countywide occupancy tax rose at a strong average annual rate of 8%, with gross receipts on the countywide prepared food and beverage tax increasing by an average of 9% each year with less year-to-year volatility. The county's hotel supply has continued to expand, with more than 1,600 new rooms in 13 new hotels between 2004 and 2009, and future growth prospects include seven hotels currently under construction and 33 hotels in various stages of planning. Additionally, the Raleigh Convention Center opened on Sept. 5, 2008, and officials report that scheduled bookings are exceeding projections.

Reflecting weakening local and national economic conditions, occupancy taxes declined 7% in fiscal 2009, although gross special tax revenues held relatively steady with 5% growth in prepared food and beverage taxes. Maximum annual debt service (MADS) coverage on bonds was 4.2 times (x) in fiscal 2009. Authority officials forecast a further 2% decline in gross occupancy taxes in fiscal 2010, again somewhat offset by 2% growth in prepared food and beverage taxes. Debt service on the refunding bonds is expected to be roughly level from 2011-2019, with refunding savings realized in 2010. Assured Guaranty Corp. (Insurer Financial Strength rated 'AA', Rating Watch Evolving, by Fitch) will provide bond insurance and a surety policy for the 2009 bonds.

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Source: Fitch Ratings