The bonds are expected to sell
In addition, Fitch rates the city's implied general obligation 'A+'.
The Rating Outlook is Stable.
The public improvement revenue bonds are special obligations of the city, payable from its covenant to budget and appropriate (CB&A), by amendment if necessary, non-ad valorem revenues. The availability of non-ad valorem revenues to pay debt service is subject to the funding of essential government services and obligations with a specific lien on non-ad valorem revenues. Such a covenant shall be cumulative to the extent not paid, and shall continue until all required amounts payable under the indenture have been paid.
KEY RATING DRIVERS
IMPLIED GO 'A+' RATING: The 'A+' rating on the implied GO reflects the city's below-average wealth indicators, balanced finances, tight liquidity, opportunity for economic growth given its location within
WEAKER DEMOGRAPHIC PROFILE: The city, while part of the strong
SATISFACTORY FISCAL BALANCES/TIGHT LIQUIDITY: General fund financial reserves are maintained at relatively high levels, but fund balance is mostly composed of large receivables from the other city funds, including the
AVERAGE DEBT LOAD: Debt levels are moderate and direct debt amortization is average. Capital needs are manageable with no plans for additional debt, although officials are analyzing a possible pension bond issuance.
LOW LEVELS OF PENSION FUNDING: The city's general employees' pension plan is poorly funded. Officials are planning on transitioning new employees to the state-run Florida Retirement System.
CB&A DEBT ONE NOTCH OFF GO: The city's non-ad valorem revenues are broad-based and provide strong coverage of CB&A debt. The bonds are rated one notch below the city's GO bonds due to the prior payment requirements of essential government service costs, the absence of a specific pledge, and the inability to compel the county to generate non-ad valorem revenues sufficient to pay debt service.
IMPROVEMENT IN LIQUIDITY LEVELS: Improved balance sheet metrics including a substantial increase in overall liquidity could lead to upward rating mobility.
FINANCIAL DETERIORATION: Significant deficits or a further squeeze on already tight cash reserves could pressure the rating.
NARROWED DEBT SERVICE COVERAGE: Additional leveraging of the city's non-ad valorem revenues which reduces coverage could have negative rating consequences.
LOCAL ECONOMY MORE LIMITED THAN COUNTYWIDE ECONOMIC ACTIVITY
The city participates in the county's broad and diverse economy although local economic activity is much more limited. The city does benefit from the location of the
City employment levels were hit much harder during the recent recession than those of the county, state or nation. Between 2007 and 2010, the city lost nearly 3,600 jobs or 23% of its employment base. Since 2010, employment growth has been relatively strong and consistent, increasing by over 9% through 2013. Unemployment rates for the city spiked up in 2010 to over 13%, but rates have moderated with job growth to 8.8% in 2013. Historically, city unemployment rates have trended above those of the county or the state. The city's economic recovery has continued into 2014.
City wealth indices are much lower than those of the county. Per capita income as of 2012 was 70% of county and 87% of state income metrics. Since 2008, city wealth levels have gained relative to county and state indicators but have declined in comparison to national per capita income averages. Poverty rates remain elevated at over 25% compared with 16% statewide.
HOUSING MARKET AND TAX BASE CONTINUE TO RECOVER
The city's housing market was devastated by the recession with high rates of foreclosures and average home values falling by 65% between 2006 and 2012, according to Zillow.com. Since 2012, the housing market has slowly recovered and home values as of
FINANCES HAMPERED BY TIGHT CASH
The city's financial position is characterized by solid reserves combined with tight liquidity. General fund balance as of fiscal 2013 totaled
General fund available cash resources, however, are below average. Fiscal 2013 unrestricted cash and investments in the general fund totaled
SPENDING CONTROLS OFFSET VOLATILE REVENUES
Property taxes make up slightly over half of general fund revenues. The city reported general fund operating surpluses in fiscals 2011 and 2013 sandwiched around a more modest deficit which increased fund balance by over
The fiscal 2014 general fund budget represents a
The tentative budget for fiscal 2015, which begins on
Management anticipates a large influx of revenues in fiscal 2016 when a new
MODERATE DEBT METRICS
Debt levels are moderate with a debt-to-market value ratio of 3.4% and debt per capita at
CITY TO TRANSITION NEW EMPLOYEES TO STATE PENSION PLAN
The city sponsors three separate defined benefit pension plans, for general employees, police and firefighters. The general employees' plan is poorly funded with the funded ratio as of
NAV REVENUES PROVIDE STRONG COVERAGE
Net asset value (NAV) revenues include almost all city general government revenues except for property taxes. NAV movement has been mixed over the past five fiscal years but has generally trended upward. Intergovernmental revenues, which include the half-cent sales tax and state revenue sharing distributions, are the largest non-ad valorem revenue source, representing 23% of total NAV revenues in fiscal 2013.
Available NAV revenues provide wide coverage of maximum annual debt service (MADS) for all city debt secured by the CB&A pledge, even when essential service expenditures are taken into account. Legal provisions are somewhat weak. There is no provision for a debt service reserve fund, which concerns Fitch less given the wide levels of coverage. An anti-dilution test limiting MADS, including the proposed debt to no more than 50% of NAV revenues in the most recent fiscal year, is not particularly rigorous, as a significant amount of additional debt can be issued under this test. The city's use of NAV funds for general operations serves as a more practical check against over-issuance.
Additional information is available at 'www.fitchratings.com'
--'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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OCTOBER 30, 2014
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