Fitch Ratings has revised its outlook on the junk bond rating of Missouri’s Chesterfield Valley Transportation Development District sales tax bonds to positive because its tax collections have rebounded and it expects to add new development this year.

The district’s $16.1 million of sales tax bonds from a 2006 issue are currently rated BB, two levels below investment grade.

The outlook on the debt was revised from stable, secured by net revenues of a 0.375% sales tax on retail sales collected within the district and subject to annual appropriation.

“The positive outlook reflects continued progress in expansion of the sales tax base with the planned opening of two sizeable outlet centers on track for later this year,” Fitch analysts wrote.

The tax sunsets in 2031, five years after the final maturity of the bonds. The debt also is supported by a cash-funded debt service reserve with a $2.03 million funding requirement.

While collections were up over the last two years due to the improved local economy, Fitch cautioned that they “remain subject to cyclical volatility.”

Revenues have underperformed from original projections and the district has had to tap reserves in recent years, although they have been replenished annually.

The stronger collections of late combined with an expanded tax base should help the district eliminate its near term reliance on reserves, Fitch said.

The district covers a five-mile-long commercially attractive retail corridor along Interstate 64 that serves the affluent St. Louis County region with 374 retail outlets, according to Fitch.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.