Senior lien debt is minimal, per capitadebt is very low to moderate, and current and projected debt service coveragelevels are strong. San Bernardino County faces significant challenges withregard to unemployment (11.9% in February 2009) and property market declineswhich will negatively affect the county’s sales and use tax revenues. Theserevenues are currently experiencing particularly harsh declines However, thesales tax base remains diverse. The authority is responsible for the roadways and public transit systems withinthe geographically largest county in California. The purpose of Measure I salesand use tax revenues is to relieve traffic congestion and provide a long-termfunding source for highways, streets, and public transit. The series 2009 noteswill provide capital funding for key transportation infrastructure projectsuntil the authority approves a new 10-year capital plan (expected by 2011 at thelatest) and sizes the associated bond issuance needs. Apart from the authorizedissuance of take-out bonds and the possible issuance of an additional $100million in notes, so long as the series 2009 notes are outstanding the authoritywill not issuance any further senior, parity, or subordinate obligations, orenter into any interest rate swaps.

The additional $100 million in notes wouldbe subject to an additional bonds test of 1.3 times (x) historical maximumannual debt service. There are $37.4 million of existing bonds outstanding, allof which will be retired on March 1, 2010. The authority ended fiscal 2008 with a strong unreserved Measure I special fundbalance of $146.8 million, or 113.5% of spending, and an unreserved debt servicefund balance of $18.9 million, or 47.6% of spending. Interest on the series 2009 notes will be capitalized until maturity. No bondreserve fund will be established for the series 2009 notes.

There is noprovision to accelerate series 2009 notes or increase their interest rate in theevent of default. The authority projects that annual debt service coverage forthe take-out bonds will grow from 5.8x in fiscal 2013 to 11.9x in fiscal 2040,absent additional debt issuance. Fitch subjected this to a severe stress test of5% annual sales and use tax revenue declines and found that coverage did notdecline below 1.3x in fiscal 2040, again assuming no additional debt issuance. After the issuance of the series 2009 notes, the authority’s direct debt remainsvery low at $143 per capita, or 0.2% of taxable assessed valuation. Taking intoaccount overlapping debt, overall net debt is moderate at $2,619 per capita, or2.8% of taxable assessed valuation. The potential issuance of $100 million ofadditional notes in the near term would not greatly increase per capita debtlevels. Fitch’s rating definitions and the terms of use of such ratings are available onthe agency’s public web site, Published ratings, criteriaand methodologies are available from this site, at all times.