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Fitch Affirms Broward County, FL's GO and Sales Tax Ratings; Outlook Stable

January 30, 2014

Fitch Ratings affirms the following rating of Broward County, Florida (the county): --Approximately $279.6 million of GO bonds at 'AAA'; --Approximately $208.9 million of half-cent sales tax revenue bonds at 'AA+'. The Rating Outlook is Stable for all bonds. SECURITY The GO bonds are secured by the county's full faith and credit and unlimited taxing power. The sales tax revenue bonds are secured by the county's share of the local government half-cent sales tax. KEY RATING DRIVERS STRONG FINANCIAL OPERATIONS: Reserve levels are strong and liquidity is excellent. The real property tax rate is well under the statutory limit. DEBT REMAINS LOW: Fitch expects the county's key debt ratios will remain low as capital needs are expected to be financed from dedicated sources and capital reserves, limiting future tax- supported borrowing needs. ECONOMY PERFORMING COMPARATIVELY WELL: Employment levels are increasing, and unemployment remains lower than the state and nation. The economy exhibits good diversity, and benefits from extensive transportation and trade infrastructure and a reputation as a leading tourist destination. Income metrics are slightly above- average. STRONG SALES TAX COVERAGE: Fiscal 2012 pledged revenue coverage of maximum annual debt service (MADS) for the half-cent sales tax revenue bonds is 4.79 times (x). Preliminary and draft fiscal 2013 pledged revenues show moderate growth. Additional leveraging is not anticipated. RATING SENSITIVITIES The rating is sensitive to shifts in fundamental credit characteristics including the county's strong financial management practices. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely. CREDIT PROFILE Broward County is situated on Florida's Atlantic coast between Miami-Dade and Palm Beach counties. The county is home to 31 incorporated municipalities including Fort Lauderdale , Coral Springs , and Hollywood , and ranks as Florida's second largest county with a 2012 population of 1.8 million. STRONG RESERVES, EXCEPTIONAL LIQUIDITY Fiscal 2012 general fund results show a $28 million net surplus (after transfers), or a solid 2.6 percent of spending. The sheriff fund, the county's other main operating fund, also posted an operating surplus of $12.2 million after transfers or 4.6 percent of spending. The total unrestricted fund balance (the sum of the unassigned, assigned, and committed fund balance under GASB 54) for the two operating funds is $335.2 million or 24.7 percent of spending. Liquidity is exceptional, with cash and investments across governmental fund types in excess of $1.4 billion or nearly 11 months of general government expenses. The draft and preliminary results for fiscal 2013 indicate a small operating surplus after transfers in the combined operating funds. The combined unrestricted general and sheriff fund balances increase to 26 percent of expenditures and transfers. The fiscal 2014 general fund budget appropriates $23.2 million of reserves, largely for capital and equipment purchases with only $4.7 million appropriated for operations. The county typically outperforms budget with both actual revenues and expenditures varying favorably to budget. Budget results are monitored throughout the year, with a formal mid-year evaluation conducted mid-March. TAXABLE PROPERTY VALUES ARE STABILIZING After a 28 percent decline in taxable assessed property values (TAV) from fiscal 2008-2012, the taxbase is stabilizing and showing signs of improvement. Values were essentially flat for fiscal 2013 and increased 4.5 percent for fiscal 2014. Officials expect continued growth for fiscal 2015; the certified values will be released in July 2014 . According to the Zillow Home Value Index, the growth in home values in Broward County is continuing, outpacing the statewide gains. During the period of tax base erosion the county reduced operating spending and impressively increased fund balances in the operating funds. DEBT METRICS MEASURE FAVORABLY The county's key debt metrics remain very modest and affordable. Net overall debt is equivalent to 1.4 percent of market value or $1,378 per capita, each measure considered low by Fitch. The overall debt burden is heavily influenced by obligations of the overlapping Broward County School Board . The cost of servicing the county's direct debt is modest at 5.1 percent of fiscal 2012 general government expenditures of $1,588 million . The county has no tax- supported exposure to variable rate debt or derivatives. The county's tax supported borrowing plans are very modest. The capital improvement plan indicates general government debt issuance of $45 million in fiscal 2016, as the county has significant balances within the transportation capital projects fund and capital outlay fund (totaling $454 million at the close of fiscal 2012) to fund capital needs. The county's borrowing plans are largely for self-supporting enterprise debt. Pension benefits are provided through the state-administered Florida Retirement System (FRS). FRS is well funded and the county's actuarial required contribution (ARC) to the plan consumes a reasonable 7 percent of total spending. Total carrying costs, debt service, pensions and other post-employment benefits, account for a moderate 9.7 percent of total fiscal 2012 governmental spending. SALES TAX BOND COVERAGE Pledged half-cent sales tax revenues improved 3.9 percent in fiscal 2012 and preliminary and draft results indicate 7.1 percent growth in fiscal 2013. Coverage of maximum annual debt service (MADS) from fiscal 2012 revenue is a strong 4.79x. County half-cent sales tax revenues peaked in fiscal 2006 at $74.1 million , and fiscal 2013 preliminary and draft revenues of $69 million are 6.9 percent off the pre-recession peak. No additional debt is anticipated. DEEP AND DIVERSE SOUTHEAST FL ECONOMY Broward County is part of the Miami - Fort Lauderdale - Pompano Beach metropolitan statistical area (MSA) which accounts for nearly 30 percent of Florida's population. Broward County income levels are slightly higher than the state average. Overall employment growth within the county has performed well with an annual average growth rate of 2.9 percent for the past three years, almost triple the job growth rate nationwide. The most recent unemployment rate from October 2013 is 5.3 percent, is well below the national rate of 7 percent. Additional information is available at ' '. In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates , S&P/Case-Shiller Home Price Index, IHS Global Insight , , National Association of Realtors . Applicable Criteria and Related Research : --'Tax-Supported Rating Criteria' ( Aug. 14 , 2012); --'U.S. Local Government Tax-Supported Rating Criteria' ( Aug. 14 , 2012). Applicable Criteria and Related Research : Tax-Supported Rating Criteria report_frame.cfm?rpt_id=686015 U.S. Local Government Tax-Supported Rating Criteria report_frame.cfm?rpt_id=685314 Additional Disclosure Solicitation Status ((Comments on this story may be sent to ))

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