Fitch Upgrades Indianapolis Local Pub Imp Bond Bank's Ad Valorem Bonds to 'AAA'; Outlook Stable

As part of its continuous surveillance effort, Fitch Ratings takes the following rating action on the following outstanding Indianapolis Local Public Improvement Bond Bank (the bond bank) bonds:

--$58.9 million, ad valorem bonds, series 2008A, upgraded to 'AAA' from 'AA+'.

The Rating Outlook is Stable.

SECURITY

The Series 2008A bonds are limited obligations of the Indianapolis Local Public Improvement Bond Bank (bond bank) which, under Indiana law, is empowered to buy and sell securities of 'qualified entities' such as the City of Indianapolis, Marion County (the city), all special taxing districts in the city, and all entities with tax levies reviewed by the city-county council. The bond bank itself has no taxing power. The underlying qualified obligation purchased by the bond bank with proceeds of the bonds is supported by an ad valorem property tax levied on all taxable property in the Redevelopment District of the city to the extent not paid from other revenues of the Metropolitan Development Commission. The bonds are additionally supported by a cash funded debt service reserve fund and the city's moral obligation pledge to replenish any draw on the reserve.

KEY RATING DRIVERS

CITY WIDE SPECIAL TAX PLEDGE: The rating upgrade to 'AAA' reflects the requirement of the City-County Council of Indianapolis and Marion County (the council) to levy an ad valorem tax, if needed to pay debt service, on all property in the Indianapolis Redevelopment District (the district), which is coterminous with the city of Indianapolis. Fitch rates the city's general obligation bonds 'AAA'.

TIMELY LEVY OF A SPECIAL TAX IF CALLED UPON: Fitch believes the city/county would levy the special tax in a timely manner if necessary to support debt service.

SURPLUS REVENUES PROJECTED TO BE ADEQUATE: Although the bonds are secured by an ad valorem tax pledge, the city/county intends to use surplus tax increment revenues to pay debt service. The tax increment revenues generated within the redevelopment district are estimated to be sufficient to cover debt service.

DIVERSE ECONOMY SUPPORTS TAXBASE: The city's economy remains diverse and continues to experience growth through new commercial development.

CREDIT PROFILE

Bond proceeds were used to purchase obligations from the district, which is governed by the nine-member Metropolitan Development Commission of Marion County (the commission). Commission members are appointed by the Mayor (four of nine members), the council (three members) and the Board of County Commissioners (two members). District bond proceeds were used for public improvements as part of the development of the JW Marriott hotel that will serve as a headquarters hotel for the Indiana Convention Center. The convention center and hotel are included in the tax increment redevelopment area (TIF).

The commission intends to make debt service payments from TIF revenues generated in a redevelopment area that encompasses a broad section of the city's downtown although TIF revenues are not pledged to series 2008A bondholders. Surplus revenues available after payment of the district's first and second lien TIF bonds will be used to service the 2008A debt. As projected by the city's financial advisor, TIF revenues are sufficient to cover debt service on all obligations, including series 2008A bonds, by a minimum of 1.21 times (x). Fitch believes the city-county would levy the ad valorem tax to support the series 2008A bonds in a timely fashion should TIF revenues fall short of debt service requirements. To date, the excess tax increment revenues have been sufficient to finance principal and interest payments, covering senior obligations and series 2008A debt service by 1.35x in 2011. For information on the district, please see Fitch's rating commentary dated Aug. 8, 2011,(Fitch Affirms Bond Bank's Downtown TIF Rev Bonds at 'AA').

Indianapolis is the state's capitol city and with 820,445 residents, it is the 13th largest by population in the nation. The Indianapolis economy is well diversified and includes pharmaceutical production, health services, life and sciences companies, manufacturing and other business and professional services companies which continue to lead the employment and city's industrial output. Development in the city has been ongoing, increasing the city's ability to generate tax revenues and increase employment opportunities. The city's population has grown 5% since 2000 equivalent to the county's growth and slightly below the state's increase of 6.6% for the same period. Wealth levels for the city approximate county and state averages but represent just 88% of national averages. Metro area income levels continue to exceed national averages.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com, and National Association of Realtors.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 15, 2011);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 15, 2011).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842

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