Fitch Ratings affirms the 'A+' rating on the following city of West Bountiful, Utah (the city) bonds:

--Approximately $3.85 million water system revenue bonds, series 2009.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by net revenues of the city's culinary water system (the system). Revenues include culinary water user fees, impact fees, and connection fees.

Key Rating Drivers

IMPROVED FINANCIAL METRICS: Following a few years of volatility, cash levels rebounded significantly to over $2.4 million ,or the equivalent of 1500 days cash on hand (DCOH), in fiscal years 2013 and 2014. Debt service coverage (DSC), which dipped to a low of 1.3x in fiscal 2010, has also climbed, averaging a strong 3x for the last three fiscal years. DSC and DCOH are expected to fall in connection with a council-adopted rate reduction, but should moderate to levels that are adequate for the rating category.

RATES REMAIN HIGH: User rates of $50 are still considered elevated compared to surrounding communities despite a 20% rate reduction in July 2014.

ELEVATED DEBT BURDEN: The system's debt burden is above average, but will moderate over time as the city plans to cash fund future capital improvements.

ADEQUATE WATER SUPPLY: Following a water well failure, the city entered into a new water supply agreement with a neighboring community, which will provide for additional water supplies for the near to intermediate term.

LIMITED BUT STABLE AREA ECONOMY: The small residential service area, located near Salt Lake City, has limited commercial development but benefits from high area wealth levels and relatively low unemployment.

RATING SENSITIVITIES

STABILITY EXPECTED: Debt service coverage and liquidity are anticipated to stabilize at sound levels for the rating category despite some planned decline in the system's financial metrics from their currently high levels. Deterioration of financial metrics, or further volatility in the system's liquidity position could pressure the rating.

CREDIT PROFILE

AMPLE SUPPLY THROUGH BUILDOUT

The system serves approximately 1,660 connections, with the majority of those being residential accounts. In 2013 the city constructed an additional water well, which subsequently failed to adequately produce water to operational standards. As an offset to this failed supply, the city entered into a contract with the city of Bountiful for additional water. This new water supply agreement, in addition to the its supply agreement with Weber Basin Conservancy District should provide the city with sufficient water rights to both imported and local well water to meet its projected culinary water needs through build-out.

FINANCIAL RESULTS EXPECTED TO STABILIZE

Financial metrics climbed to very strong levels after two significant rate increases in fiscal 2009 (36%) and 2010 (110%) which followed many years of no rate increase. Coverage grew to 3 times (x) debt service and remained elevated from fiscal years 2012 to 2014, after dipping to a low of 1.3x in fiscal 2010. Liquidity also grew from a zero balance in fiscal 2010 to a healthy $2.4 million, or the equivalent of 1500 DCOH, in fiscal 2014, which is more that 6x the 'A' rating category median. Management forecasts, which appear reasonable and include the rate reduction, point to DSC stabilizing between 1.8x and 1.7x through 2019. Fitch believes these DSC levels are adequate for the rating level.

As of fiscal 2014, the system maintains an outstanding $190,000 loan to the golf fund and has formalized a repayment schedule starting in 2016 for a term of 20 years. No additional loans from the water fund to the golf fund are anticipated going forward. Loans to the golf fund in fiscal 2010 resulted in the system posting a zero cash balance.

ADEQUATE LIQUIDITY KEY TO CREDIT STABILITY

The 2015 - 2019 capital improvement program (CIP) totals approximately $2.7 million and will be entirely funded from user charges and cash balances. The system's liquidity position has been volatile over the past five years, reaching highs of over 1700 DCOH ($1.2 million in unrestricted cash) in fiscal 2007, to zero in fiscal 2010 and rebounding again to over 1500 days in fiscal 2014. Fitch believes the system's future cash position will decline given plans to cash fund the CIP and the reduction in rates. Maintenance of the current rating will depend on management's ability to balance funding of future capital needs while maintaining adequate liquidity levels.

RATE FLEIXBILTY REMAINS STRAINED

City council adopted a rate reduction of 20% effective July 2014, by lowering the fixed fee dedicated to capital improvement by $13 to $10. This reduced the average monthly residential bill (for 7,000 gallons of water consumed) to $50, which is still high when compared to surrounding communities. This reduction brings the user charge below Fitch's affordability benchmark of 1% of median household income for residential customers; however, Fitch is still concerned that the rapid and significant rate increases have sharply diminished rate flexibility.

The substantial rate adjustments in fiscal years 2009 and 2010 were needed to support the city's aggressive plan for replacement of aging water lines. Fitch does not believe that the diminished rate flexibility will adversely impact the system's financial or capital funding capacity because capital needs are well defined and supported by the rate structure, alleviating the need for any additional borrowing.

DECLINING DEBT BURDEN; STANDARD LEGALS

The system's elevated debt levels should improve given the lack of future borrowing plans. Currently, outstanding debt per customer basis is moderately high at $2,446 when compared to the 'A' category median of $1,963. Amortization is rapid and projected debt per customer in five years of $1,746, falls favorably below Fitch's 'A' median of $2,041. Legal protections for bondholders are standard and include a 1.25x ADS coverage rate covenant and additional bonds test. The debt service reserve fund is supported by a surety policy.

SMALL, STABLE SERVICE AREA

The city is a residential community of just under 5,400 residents located eight miles north of Salt Lake City. While primarily a bedroom community with few major employers of its own, the city has good access to both the Salt Lake City and Davis County employment markets. Wealth levels are above average at 139% and 156% higher than the state and nation, respectively and area unemployment is low at 3.2% for the county, which is on par with the state's 3.3% but well under the nation's 5.7% for September 2014.

Additional information is available at 'www.fitchratings.com'

In addition to the sources of information identified in Fitch's U.S. Municipal Revenue-Supported Rating Criteria, this action was additionally informed by information from Creditscope.

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria' (June 2014);

--'U.S. Water and Sewer Revenue Bond Rating Criteria' (July 2013);

--'2015 Water and Sewer Medians' (December 2014);

--'2015 Sector Outlook: Water and Sewer' (December 2014).

Applicable Criteria and Related Research:

2015 Water and Sewer Medians

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=818409

2015 Outlook: Water and Sewer Sector

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=818410

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

U.S. Water and Sewer Revenue Bond Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715275

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=964775

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