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Fitch Affirms Rating on Cape Coral, Florida's Series 2005 Spec Assessment Refunding Bonds; Outlook Stable

February 12, 2014

Fitch Ratings affirms and corrects the 'BBB+' rating on Cape Coral, Florida's$20.2 million outstanding wastewater and irrigation water refunding assessment bonds (Southwest 1, Pine Island Road and Southwest 3 Areas), series 2005.

The bonds were inadvertently removed from Fitch's web site and were not included in a June 14, 2012 and June 28, 2011 press release affirming similar ratings. Fitch would have affirmed the bonds at 'BBB+' with a Stable Outlook. The bonds are now displayed with the correct rating history.

The Rating Outlook is Stable.


The assessment bonds are secured by special assessments levied and collected in the affected area, and by a covenant to pay debt service from net revenues of the water and sewer utility system after payment of senior and subordinate (state loans) obligations. The bonds are also secured by a surety-funded debt service reserve fund.

Key Rating Drivers

Back-Up Pledge: The key credit strength is the city's covenant to use net revenues of the city's water and sewer system, on a super- subordinate basis, to make up any shortfall in debt service payments on outstanding assessment bonds. Assessments alone do not in all cases fully cover debt service.

Improved Utility System Performance: The system's financial profile has strengthened in recent years due to user rate increases and an improving economy, providing adequate capacity to cover any potential debt service deficiencies on special assessment bonds. Fitch rates the system's utility bonds 'A'.

Limited Coverage: Special assessments are levied in small geographic areas and are structured to provide narrow annual debt service coverage on outstanding bonds, leaving little margin for non- collection. Historical collections have been satisfactory in most years, although certain areas have had to utilize accumulated excess assessment revenues to meet annual debt service obligations.

Tax Lien Provides Incentive: Special assessments are included as a line item on the property tax bill with nonpayment resulting in a property tax lien on parity with those related to ad valorem tax delinquencies.

Economic Pressures Subsiding: The city continues to face challenges as a result of the housing crisis, but aspects of the economy are showing signs of improvement with area labor and housing prices showing improvement.

Rating Sensitivities

Utility Credit Quality: The rating relies heavily on the system's ability to cover shortfalls in special assessments. A change in system credit quality would likely impact the rating on special assessment bonds.

For additional information on the city's special assessment bonds and the system, see the following Fitch Rating Action Commentaries:

'Fitch Affirms Cape Coral, Florida's Outstanding Special Assessment Debt at 'BBB+'; Outlook Stable dated May 31, 2013; and, 'Fitch Affirms Cape Coral, Florida's Water and Sewer Revs at 'A'; Outlook Stable' dated May 9, 2013.

Additional information is available at ''.

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