2008-05-07 23:57:13 -

- Fitch Ratings assigns an 'AA' rating to Tampa Bay Water, Florida's (TBW, or the authority) approximately $104 million utility system improvement revenue bonds series 2008. Subject to market conditions, the bonds are scheduled for a negotiated sale the week of May 19. Bond proceeds will fund certain capital projects included in the authority's multi-year capital improvement plan (CIP). At

this time, Fitch also upgrades to 'AA' from 'AA-' the rating on approximately $1.1 billion in outstanding parity debt. The Rating Outlook is Stable.

The upgrade to 'AA' reflects the authority's consistently strong financial and capital planning efforts evidenced by its ability to continually develop alternative water supply sources in a challenging environment while still maintaining a stable and healthy financial position. The rating also incorporates a sound operating structure, high quality management, and a strong and diverse service area. The authority has effectively developed new water supplies well in advance of mandated reductions in groundwater withdrawal, although demand projections and periodic drought conditions support continued urgency in seeking new sources. Fitch expects the identification and funding of additional projects that will provide sufficient water sources and satisfy environmental concerns to remain a challenge for the authority for the foreseeable future.

TBW's financial reserves are sound, and the service area, with an estimated population of 2.5 million, continues to grow and diversify. Under the strong security structure, six member governments (Hillsborough, Pasco, and Pinellas counties and the cities of New Port Richey, St. Petersburg, and Tampa) make several, not joint, operating expense payments to TBW for highly essential water supplies. Tampa is the only member government with its own separate water supply and the only member not charged the uniform rate required under the master water supply contract. Payments to TBW are made before disbursements to holders of respective city and county utility bonds, making the payments from member governments exceptionally well secured.

With the costly remediation of TBW's seawater desalination facility complete, and an increased utilization of its enhanced surface water system, the authority now maintains adequate supply through 2012 despite a recently mandated reduction in allowable groundwater withdrawal. With the desalination plant fully operational, the authority expects the full $85 million reimbursement from the Southwest Florida Water Management District (SWFWMD) to be disbursed this year. The grant money will be used to redeem outstanding series 2002 variable-rate bonds. Proceeds from the current offering will fund a portion of TBW's System Configuration II program, which will consist of a series of capital projects aimed at expanding the use of surface water and expanding the capacity of the authority's transmission system to allow for broader distribution. Completion is expected by 2011 and is expected to satisfy demand through 2017.

Net revenue and fund balance provide a modest cushion above the rate covenant requirement, which requires sum-sufficient debt service coverage from annual revenues and 1.25 times (x) coverage when the fund balance is added to net revenues. Coverage of debt service by net revenues alone was only 1.13x for fiscal 2007. Including the fund balance, coverage rises to a solid 1.37x. The authority's fiscal 2008-2011 capital improvement plan is manageable, totaling $404.2 million. Estimated capital costs do not reflect any grant funding from SWFWMD, though a recent funding agreement will provide approximately $116 million in grant support to the authority over the next several years.

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
Christopher Hessenthaler, 212-908-0773
Amy R. Laskey, 212-908-0568
or
Media Relations:
Cindy Stoller, 212-908-0526