2008-04-08 23:49:45 -
- Fitch has assigned an 'A+' to approximately $99.7 million of the Florida Department of Environmental Protection's Everglades Restoration revenue refunding bonds, series 2008A. Fitch has also downgraded to 'A+' from 'AA-' the rating of the Florida Department of Environmental Protection's approximately $2.6 billion outstanding Preservation 2000 and Florida Forever bonds, $100 million of outstanding Florida Everglades bonds, and $60
million of outstanding Save Our Coast bonds. The Rating Outlook is Stable.
The rating considers the volatility of the pledged documentary stamp tax and the projected debt service coverage currently afforded by the security. The rating downgrade reflects the rapidity and depth of revenue loss, associated with the state's real estate correction, and its impact on debt service coverage. Various covenants protecting the allocated share of revenues underpin the rating. Pledged revenues declined 25.3% in fiscal 2007 and are now estimated to decline 35.6% further in fiscal 2008. While projected maximum annual debt service (MADS) coverage on bonds outstanding after this refunding is anticipated to remain satisfactory at nearly 2.9 times (x) by fiscal 2008 collections, coverage is down from nearly 6.0x by fiscal 2006 collections. When future, potential issuances are considered, fiscal 2008 revenues sufficiently cover expected MADS 2.35x, albeit down from 4.9x coverage by fiscal 2006 revenues.
The Stable Rating Outlook reflects sound projected debt service coverage levels at the 'A+' rating level, the rapid amortization of existing debt with a large portion of debt retired by fiscal 2014, and the state's control and flexibility of future debt issuance.
Current law and covenants require that 62.63% of documentary stamp taxes, after a 7% general fund service charge, must be used first for payment of debt service. In the event of revenue insufficiency, the 7% service charge would be waived under state law. Net of the service charge, pledged revenues more than tripled to $2.36 billion from fiscal 2001 to fiscal 2006 - during a period of low mortgage rates, second home buying, and increased investment in homes and condominiums; generally described as a housing boom. In fiscal 2007, pledged receipts plummeted 25% to under $1.77 billion, as the state entered a housing market correction evidenced by significant declines in housing starts, existing home sales and sale prices, and a rapid rise in mortgage delinquencies and foreclosures.
Florida (the state) holds revenue estimating conferences that meet at least twice a year to revise economic projections, including those assumptions used to derive estimated documentary stamp tax collections. Estimated receipts have been downwardly revised multiple times since the spring of 2006. Most recently, a March conference reduced further the projected fiscal 2008 pledged revenues. Fiscal 2008 pledged revenues are now anticipated to drop nearly 35.6% from fiscal 2007 levels and revenue growth is not anticipated to return until fiscal 2010. The March revision may prove optimistic as February 2008 total receipts were 46.6% below February 2007 collections, although year-to-date collections were 32.8% below last year's level. Estimated fiscal 2008 pledged taxes cover MADS in fiscal 2009 after this sale nearly 2.9x and cover projected MADS in 2011 by 2.35x, assuming full issuance under the current debt authorizations for the Preservation 2000, Florida Forever, and Everglades Restoration programs.
The state has levied documentary stamp taxes for 70 years and has issued land acquisition bonds of several types since 1964. Such issues included the Preservation 2000 bonds beginning in 1991 and Florida Forever bonds since 2001, pursuant to a constitutional amendment. Preservation 2000 and Florida Forever provide for revenue bond issuance to acquire land and water areas for conservation, recreation, water resource development, and preservation. State law now limits issuance under the Preservation 2000 program to bond refundings. The state separately limits issuance under the Florida Forever program to a maximum of $3 billion.
The Everglades Restoration revenue bonds are for acquiring and improving land and water areas, including water supply and flood protection, under the 35-year $10.9 billion Everglades Restoration program, a joint federal, state, and local endeavor. The Everglades Restoration bonds were approved by constitutional amendment in 1998, with a subsequent statutory authorization for up to $800 million in bonds payable from a junior lien at that time on pledged documentary stamp tax revenues. The amount expected to be bonded has been reduced by the $400 million of cash-funded project costs since fiscal 2003 when the program was started. The 2006 Florida Legislature elevated the Everglades Restoration bond lien to parity status with the Preservation 2000 and Florida Forever bonds. The additional bonds test remained at 150% of MADS.
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 Ratings, New York
Kyle R. Gephart, +1-212-908-0661
Richard Raphael, +1-212-908-0506
Cindy Stoller, +1-212-908-0526 (Media Relations)
