In addition, Fitch affirms its 'AA-' implied unlimited tax general obligation (ULTGO) rating for the county.
The Rating Outlook is Stable.
The bonds are secured by a covenant to budget and appropriate (CB&A) legally available non-ad valorem (NAV) revenues, by amendment if necessary, in an amount sufficient to pay debt service on the bonds. The availability of NAV revenues to pay debt service is subject to the funding of essential government services and obligations with a specific lien on NAV revenues. The issuer's NAV covenant is cumulative and continues until the bonds have been fully paid.
KEY RATING DRIVERS
REDUCED BUT STILL ADEQUATE RESERVES: Despite recent reductions, county reserve levels remain adequate. Fitch assumes in its rating affirmation that the county will adhere to its fiscal 2014 budget, which assumes no additional draw-down of fund balance.
BELOW-AVERAGE ECONOMIC PROFILE: The county economy is limited and highly concentrated, with Duke Energy its top taxpayer and second largest private employer. County wealth and income indicators are below average and unemployment remains above state and national levels. Duke Energy has filed a lawsuit challenging the county property appraiser's calculation of its taxable assessed value (TAV) as overstated, and has underpaid its property taxes for the last two years, resulting in significant county revenues losses.
LOW DEBT BURDEN: Debt levels are low and expected to remain moderate, even with potential issuance considered in the near term. Principal amortization is average. Carrying costs, including debt service, pension and other post-employment benefit expenses (OPEB) are low.
BROAD AND DIVERSE NAV REVENUE BASE: NAV revenues are broad and diverse and are more than adequate for use toward the bonds' maximum annual debt service (MADS) even after accounting for coverage of MADS on county debt with a prior claim on NAV revenues.
COVENANT DEBT NOTCHING: A one-notch distinction between the capital improvement revenue bond rating and the implied ULTGO rating reflects the absence of a pledge of specific revenue and the inability to compel the county to raise NAV revenue sufficient to pay debt service.
MAINTENANCE OF RESERVES: Despite a recent trend of use of reserves to fund operations, reserves remain satisfactory. However, continued use of reserves for operating purposes, with reserves dropping below policy levels, could pressure the rating.
NAV REVENUES PROVIDE SOUND BASE FOR DEBT REPAYMENT
Covenant revenues are broad and diverse, with the largest components being fuel taxes, the local government half-cent sales tax, state revenue sharing, and charges for services. Fiscal 2013 revenues totaled about
Certain NAV revenues are pledged first to other county debt issuance. Including MADs on this other debt, coverage is still strong at about 5.6x. The county depends on excess revenues to fund general government operations, and consequently, Fitch expects coverage to remain at similarly high levels.
ADEQUATE RESERVES DESPITE DRAW-DOWNS
Fund balance levels are adequate despite five consecutive annual drawdowns through fiscal 2013. The county's budget has been structurally imbalanced in recent years even with expenditure reductions including elimination of capital projects, early retirement incentives, and reduction in workforce. General fund revenues have seen declines resulting from general economic weakening and property tax decreases driven by tax base losses and maintenance of a flat millage rate. The county had made the strategic decision to maintain a stable tax rate, using reserves to plug gaps between recurring revenues and expenditures.
The fiscal 2013 total general fund balance is estimated at
TAX DISPUTE CHALLENGES FINANCES
For fiscal years 2013 and 2014 the county had to address the impact of a tax dispute between the county property appraiser and Duke Energy. A lawsuit challenged the county property appraiser's calculation of the TAV of Duke Energy's Crystal River Energy Complex, which includes nuclear and coal power plants. Although it made a 'good faith' tax payment, Duke Energy underpaid its full tax bill, resulting in a loss to the general fund of about
For the fiscal 2014 budget, the county estimated a total value for Duke Energy disputed tax payments of about
LIMITED LOCAL ECONOMY
Power-generation has long been a dominant county industry, with Duke Energy the county's top taxpayer and second largest private employer. Duke Energy alone accounted for 24% of TAV in fiscal 2012. The company's Crystal River Nuclear Power Plant, which currently employs about 275, is in the process of being shut down, a factor in the valuation dispute. Construction of a new natural gas power plant is planned, to be completed by 2018, which could create over 500 temporary construction jobs and under 100 permanent jobs when completed, partly offsetting the loss from the shutdown of the
The county's TAV has declined annually in recent years, with a total decline of 27% for fiscal years 2008 through 2013. For fiscal 2014, TAV was initially assessed at
Healthcare is also an important economic sector, though to a lesser degree. Citrus
LOW DEBT LEVELS
Debt levels are low at
The county provides pension benefits through the state-administered Florida Retirement System (FRS) and funds 100% of its required contribution. Pension costs were a low 2.9% of total governmental spending in fiscal 2012. The FRS funding ratio as of
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope,
Case-Shiller Home Price Index,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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