The Rating Outlook is Stable.
The 2010A bonds are secured by a senior lien on special taxes from the CFD and assessments from the AD. The 2010B bonds are secured by a subordinate lien on these revenues.
KEY RATING DRIVERS
SOLID SENIOR DEBT SERVICE COVERAGE: The series 2010A bonds benefit from the stability of the underlying tax base, a closed lien, low taxpayer concentration, solid debt service coverage, short amortization, and special taxes on a parity lien with ad valorem property taxes. Offsets to these strengths include the CFD's small size and escalating debt service.
SUBORDINATE LIEN, WEAK DEBT SERVICE COVERAGE: The series 2010B bonds mature in
STABLE LOCAL ECONOMY: The city of
The rating is sensitive to shifts in revenue collections and delinquency rates and continued availability of reserve funds in the event of any shortfalls. The Stable Outlook reflects Fitch's expectation that given the maturity of the underlying tax bases, historically low delinquency rates, and significant reserve funds, such shifts are unlikely.
The city of
The CFD consists of 630 single-family homes on 123 acres of land located in the mixed-use community of Harbor Bay Isle on
MATURE, STABLE ECONOMIC BASE
SOUND ASSESSMENT STRUCTURE
Proceeds of the series 2010A and 2010B bonds were used to purchase local obligations of the CFD and AD, respectively. The repayment of the local obligations relies upon special taxes and assessments on district property owners.
The CFD tax is levied at a rate intended to achieve 1.0 times (x) coverage of its obligation to the authority, which in turn provides the same coverage for the series 2010A bonds. However, the CFD has ample flexibility to increase its tax rate. If levied at the maximum rate, the resulting revenues would provide about 1.7x coverage of its annual payments to the PFA. The CFD neither levies nor is obligated to levy special taxes in excess of its obligation to the PFA. As a result, there are no surplus CFD revenues to provide enhancement to the subordinate 2010B series.
The CFD levies special taxes on all residential properties through a special tax formula. The formula is based predominantly on square footage and allows for an automatic annual 2% rate escalator. For fiscal years 2011 through 2013 the special tax rate was levied at 61% of the maximum rate.
The AD's assessment revenues are pledged first towards the senior 2010A bonds and on a subordinate basis to the 2010B bonds. The AD assessment is limited to 1.1x of debt service on the series 2010B bonds.
LOW CFD DELINQUENCIES; RAPID AMORTIZATION
Because the CFD tax base consists solely of single-family homes, concentration among the top 10 taxpayers is low (about 3% of the levy). The CFD additionally benefits from a high value-to-lien ratio (45:1 in 2013) and a history of low delinquencies. For fiscal years 1997-2008, the delinquency rate was zero, but has risen to over subsequent years to a still modest 2.03% in 2013. Delinquencies could rise significantly before debt service coverage levels would be materially affected. CFD assessed valuation levels have fluctuated modestly in recent years; however, tax rates are levied based on square footage, not valuation levels.
Overall CFD debt levels are midrange at 4.6% of AV. Amortization is rapid with 100% of principal maturing within 10 years (2019) and the closed lien prevents the issuance of parity debt. The CFD debt service reserve fund is equal to 10% of par outstanding for the 2010A bonds.
HIGHLY CONCENTRATED AD TAX BASE; BONDS MATURE IN 2014
The AD district is nearly fully developed, with commercial and industrial parcels providing 96% of assessment liens. Taxpayer concentration is extremely high, with the top taxpayer,
Debt service is structured so that local assessments will cover subordinate series 2010B debt service a low 1.10x, assuming no delinquencies. The risks related to an inflexible assessment levy, low debt service coverage, and high taxpayer concentration are offset by a
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,
--'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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