In addition, Fitch affirms approximately
The BANs are scheduled for negotiated sale on
Proceeds will be used to provide cash flow funds to
The Rating Outlook on the bonds is Stable.
The bonds and BANs are secured by a pledge of ECFSA's right title and interest in revenues of the authority which consist of the county's local sales tax revenues, state aid revenues paid to the authority, and other aid, rents, fees and charges of the authority.
KEY RATING DRIVERS
STRONG LEGAL PLEDGE: The authority is a bankruptcy-remote, statutorily defined issuer. A tight legal framework with a first perfected security interest in the pledged revenues protects bondholders.
STRONG COVERAGE LEVELS: Coverage levels are high, and the bonds maintain statutorily defined non-impairment mechanisms and maximum outstanding debt limits.
MARKET ACCESSIBILITY: The 'F1+' rating on the BANs reflects the strong 'AA+' long-term rating and the flexibility at maturity to roll over or retire the notes with long-term debt.
SENSITIVE REVENUE STREAM: The pledged sales tax revenue is economically sensitive and derived from a somewhat below-average economic base.
DEBT SERVICE COVERAGE: The rating is sensitive to shifts in debt service coverage levels. Given the broad coverage and somewhat limited economic base, a change in coverage sufficient to affect the rating is unlikely.
Declining population trends experienced during most of the past decade appear to have leveled off in recent years. The 2010 U.S. Census recorded a population of 919,040, a 3.3% decline since 2000. Wealth indices, including market value per capita of
ROBUST SECURITY STRUCTURE
ECFSA was created under the Erie County Fiscal Stability Authority Act (the Act) as a public benefit corporation by the state of
ECFSA is a bankruptcy-remote issuer. The bond structure grants a first perfected security interest in
STRONG PLEDGE FOR BANS
While the legal pledge for the BANs is revenue of ECFSA, which includes county sales tax revenue and state aid, repayment is expected to be derived from set-asides made by the county into a 'blocked account.' Set-asides in the blocked account can only be used for debt service on the notes. If the county fails to make a set-aside payment within three business days of its due date, ECFSA will notify the trustee to deposit funds received from the next sales tax installment into a bond sub-account.
If funds are not sufficient at the last set-aside date (30 days prior to the note maturity) to repay bondholders, either the authority or the county is authorized to issue rollover BANs or long-term bonds. Fitch believes this schedule provides adequate time to issue such debt given the authority issuance is already in place and any uncertainty as to the repayment from set-asides would be identified by the authority and acted upon earlier than 30 days prior to maturity.
SOLID COVERAGE LEVELS EXPECTED TO CONTINUE
Pledged sales tax revenue has grown steadily, providing healthy debt service coverage and strong bondholder protection. Sales tax revenues were up 4.5% in 2011, 2.4% in 2012, and 2.3% in 2013. For the first four months of 2014, sales tax revenues are up 2.9%, below the 3.4% assumed in the 2014 budget. Coverage of debt service by 2013 revenue was 10.3x. Coverage of MADS (
Potential threats to current strong debt service coverage include declines in county sales tax revenue and alterations of the tax structure by the state or county. Fitch believes the former is mitigated by the stability of the county's tax base, and while pledged revenues are economically sensitive, the magnitude of deterioration that would need to occur to have a significant impact on debt service coverage appears unlikely.
While the county and state both have the unilateral ability to alter the tax structure, Fitch believes that the risk is mitigated by state and county non-impairment clauses; specifically, the county covenants to maintain a local sales tax rate of at least 3% through 2039. In addition, any change in local tax law cannot result in coverage below 2.0x MADS on all outstanding authority bonds. Of the 4.75% sales tax rate, 1.75% is subject to biennial renewal, with the next renewal expected on
On a pro forma basis, 2013 collections of only the county's share of the 3% local sales tax provide 2.5x coverage of MADS. The authority receives a lower percent of the first 3% of the local sales tax than of the additional 1.75% due to allocations of the revenues to municipalities and school districts.
STABLE COUNTY ECONOMY WITH GROWTH POTENTIAL
The county's economy stabilized in 2010 after experiencing several years of job losses due to the recession. Unemployment rates exceeded 8% in 2009 and 2010 but have since moderated and remain below both the state and national levels. For
Taxable assessed value growth has been consistent with valuations increasing in each of the past ten years. Average annual tax base growth over the past five years was 2.1% including a 3.6% increase in fiscal 2013.
Economic development is strong with a number of public and private sector projects in various stages of construction. Fitch believes these projects in conjunction with the state's multi-year commitment to the region to provide
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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