NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'AA' rating on $33.245 million in Development Authority of Clayton County (the authority) revenue bonds (TUFF Archives LLC-Secretary of State of Georgia Project), series 2012.

The Rating Outlook is Stable.

SECURITY

Limited obligations of the authority are secured by rental payments of TUFF Archives LLC, which are derived from lease payments of the state of Georgia subject to annual appropriation.

KEY RATING DRIVERS

ANNUALLY APPROPRIATED PAYMENTS: The credit quality of the TUFF Archives revenue bonds, at 'AA', is linked to Georgia's 'AAA' general obligation (GO) bond rating. The bonds are supported by lease payments that derive from annual appropriations of the state's general fund. The bonds do not carry a direct pledge of the state, although the financing structure is well-established and the state has demonstrated a commitment to the bonds.

LOW LIABILITY BURDEN: The state's long-term liability burden is low and overall debt management is conservative. While Georgia issues bonds regularly for capital needs, amortization of principal is rapid. In addition, the state fully funds its actuarially calculated annual required contributions (ARC) for pensions, keeping the unfunded liability very manageable.

FISCALLY CONSERVATIVE: Georgia has a long history of conservative revenue estimation and balanced operations and has consistently taken timely action to address fiscal weakness. The state has capitalized on recent revenue growth to make substantial progress in rebuilding reserves.

DIVERSIFIED ECONOMY: After a sharp recessionary downturn, the state's diverse economy is showing signs of an accelerating recovery.

RATING SENSITIVITIES

GO-LINKAGE: The rating on the bonds is sensitive to changes in the state's GO rating, to which it is linked.

APPROPRIATION COMMITMENT: The rating is also sensitive to any change in the state's commitment to appropriating funds on an annual basis sufficient to cover the bonds.

CREDIT PROFILE

The 'AA' rating on the authority's TUFF Archives LLC revenue bonds reflects the bonds' source of payment, state lease payments for the Georgia State Archives Building (state archives), which are derived from annual appropriations of the state general fund. The use of a lease structure for a facility financing is unusual for the state and its obligation to the bonds is less direct than is typical for a lease appropriation credit, resulting in a two-notch distinction from the state's 'AAA' GO bond rating. However, the bond structure is well-established and the state has demonstrated a continuing commitment to the facility. The 2012 bonds refunded outstanding debt for annual debt service savings with level debt service through final maturity in 2033.

Bonds were originally issued in 2001 to fund the construction of the new state archives facility. Under the financing structure, the authority issued the bonds and loaned the proceeds to TUFF Archives LLC, a single-purpose entity which bought the site from the authority, constructed the facility, and leased the facility back to the authority (the primary lease). Under a sublease between the authority and the Office of the Secretary of State (OSS), whose responsibilities include managing the state archives, the state makes annual lease payments sufficient to cover debt service and certain other facility expenses. In 2013, the legislature transferred management of the archives from the secretary of state to the board of regents for the university system with bill HB 287. The transfer included all legal obligations, including those under the sublease. Fitch does not view the transfer as material to the rating.

The trust estate pledged to bondholders encompasses the primary lease between the authority and TUFF Archives LLC, including all rental revenues derived from the facility, as well as the loan obligation of TUFF Archives LLC to the authority. Although the trust estate excludes the sublease between the authority and OSS (now the board of regents), the primary lease restricts the facility essentially for use as a state archive. The provisions of the primary lease and sublease, notably annual renewal provisions, are otherwise largely identical, and the leases provide for continued tenancy by OSS (now the board of regents) beyond the final maturity of the bonds.

Fitch views the bonds as an obligation of the state, and the state has demonstrated a commitment to the financing. Funds to support the archives, including lease payments, are appropriated from the state's general fund. Georgia's enacted fiscal 2015 budget includes general fund appropriations for rental payments within the budget for the board of regents, in a line item specifically for the archives. In the unlikely event of a delayed state budget, a debt service reserve of $2.2 million would protect bondholders.

The state archives are located in Morrow, Georgia, adjacent to the campus of Clayton State University. The archives house certain state and local government records, including all state legislative records, business registrations, and property records.

STATE RATING SUPPORTS BONDS

The longstanding 'AAA' rating and Stable Outlook on Georgia's GO bonds reflect its conservative debt management, a proven willingness and ability to support fiscal balance, and a diversified economy. The state took repeated action during the recession to maintain fiscal balance through steep spending cuts, use of federal stimulus, and draws from its rainy day fund, and the revenue shortfall reserve (RSR). Since then it has maintained a conservative approach to fiscal management, curbing spending growth and making progress in rebuilding the RSR balance. The state's debt profile is conservative and its debt burden is moderate as a percentage of personal income.

For further information on the state's 'AAA' rating, see Fitch's press release dated June 12, 2014, 'Fitch Rates Georgia $977.83MM General Obligations 'AAA'; Outlook Stable,' available at www.fitchratings.com.

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

Applicable Criteria and Related Research:

--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

U.S. State Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=929855

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.