2009-06-26 23:01:04 -

As part of its ongoing surveillance efforts, Fitch Ratings affirms its rating on the Florida Municipal Loan Council's approximately $66 million outstanding revenue bonds (North Miami Beach water project) series 2002B. The bonds are secured by loan repayments from the city of North Miami Beach (the city) pursuant to a loan agreement between the Florida Municipal Loan Council (FMLC) and

the city under which the city irrevocably pledges its net water system revenues to loan repayments.

The Rating Outlook is Stable.

The rating is based on the city water system's credit characteristics, including a stable, mainly residential service area; sufficient water supply; below-average income levels; competitive rates; limited additional capital needs; adequate financial margins; and average legal provisions. While liquidity has substantially weakened over the last few years due to pay-go financings, Fitch expects the system's forecasted double-digit rate increases to improve the system's overall cash position going forward.

The FMLC is a public body created under the laws of the state of Florida to finance projects on a cost-effective basis and to benefit municipalities through economies of scale. Its board of directors consists of between one and seven (currently five) elected officials appointed by the president of the Florida League of Cities, which is the program's administrator. The FMLC will stay in existence as long as any obligations of the issuer or of participating entities issued under the program remain outstanding.

The 2002 borrowing from the FMLC financed the construction of new wells and expansion of the system's water treatment plant, which allowed the city to produce a greater share of its own water supply and to reduce its reliance on Miami-Dade County (the county) for potable water.
Currently, the city produces almost three-quarters of its own water supply pursuant to a 20-year consumptive use permit (CUP) granted by the South Florida Water Management District (SFWMD) in 2007. The balance is purchased from the county. Favorably, the city's total water supply and treatment capacity are well in excess of demand.

The city is located in northeast Miami-Dade County, midway between the cities of Miami and Fort Lauderdale. The city's population is about 38,200, but the water system serves a much larger population of about 180,000 through 33,500 metered connections. The service area, whose boundaries are not expected to change, includes the communities of Sunny Isles and Golden Beach to the east, Norland and Bunche Park to the west, and Ojus to the northeast. Customer growth is expected to be minimal.
City income levels are well below state and U.S. averages, but customers outside the city provide a substantial amount of system revenues, including a 15% surcharge. County income levels are still below state and U.S. levels but are substantially higher than the city's.

Historical debt service coverage is strong and should remain adequate, at least, going forward. Unaudited results for fiscal 2008 show coverage of all outstanding parity bonds and loans at 2.3 times (x), while internal financial projections through 2012 indicate coverage fluctuating from a high of 1.8x in fiscal 2009 to a low of 1.3x in fiscal 2011. Minimal rate increases and funding of capital projects on a pay-as-you-go basis over the last several years have diminished liquidity levels, though forecasted annual rate increases of 12%-13% through 2012 are expected to boost the system's cash position to an amount more in line with historical balances. Capital needs, estimated at about $16 million over the next five years, are quite manageable and are expected to be financed on a pay-go basis.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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 RatingsChristopher Hessenthaler, +1-212-908-0773 (New York)Kelly
McGary, +1-813-223-6600 (Tampa)Cindy Stoller, +1-212-908-0526(Media
Relations, New York) cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com