NEW YORK - (Business Wire) In the course of routine surveillance, Fitch Ratings affirms the 'A+' rating on Fort Lauderdale, Florida's outstanding $2,870,000 sanitation revenue bonds, series 2000. The Rating Outlook is Stable. The bonds are secured by net revenues of the sanitation fund and carry a rate covenant and additional bonds test requiring debt service coverage of 1.35 times (x).
The 'A+' rating reflects the high fund balances of the city's sanitation enterprise fund, a fairly stable revenue base largely collected on the utility bill, above average sanitation rates compared to neighboring jurisdictions, and minimal capital needs with no future debt plans. The rating further reflects adequate legal provisions, a good service area, and renewal risks associated with interlocal and hauling contracts that expire prior to final maturity of the bonds.
Recent lower tonnage levels caused by recessionary pressures have caused coverage levels to decline to an estimated 1.75 times (x) in fiscal 2009, from a high 5.6x in fiscal 2008, and below average for the rating level. Further erosion to 1.04x is projected for fiscal 2010 and no remedial action was taken to increase coverage given management's stated plan to early-redeem the bonds on or before the March 1, 2010 call date. The Stable Outlook largely reflects the planned early redemption. If the bonds are not called as planned, Fitch will reevaluate the credit.
The city operates its sanitation system as an enterprise fund focused on solid waste collection and disposal. The system serves some 37,400 accounts, 80% of which are residential. The city provides collection for 45% of its residential base. Commercial establishments contract individually with private haulers. All private haulers that operate in the city are required to pay a monthly licensing fee to the city. Solid waste collected by the city is disposed of at a Broward County operated facility pursuant to an interlocal agreement that expires in 2013. Monthly sanitation fees, equal to approximately $28.95 for residents, are the highest in Broward County, although fees include additional services that neighboring municipalities include in other charges. The fees are included as a line item on the water utility bill.
System revenues available for debt service in fiscal 2008 are 59% derived from assessments collected on the utility bill, 19% from hauler franchise fees collected from over 20 private haulers and 8% as a distribution from Broward County resource recovery board. Fiscal 2008 net revenues amounted to $3.1 million down from $4.9 million a year earlier. Coverage of debt service, while generally strong since fiscal 2004, exhibits volatility due to declining tonnage as well as market prices for sales of recyclable items in the waste stream. Coverage of fiscal 2008 annual debt service was still high at 5.6x but down from 8.9x in fiscal 2007.
Unrestricted fund balances have improved, closing fiscal 2008 with $7.5 million. Preliminary unaudited fiscal 2009 revenues fell 12.3% below the prior year reflecting a 7.8% decline in hauler franchise fees as well as lower recycling revenues due to lower prices for recycled items and non-receipt of county resource recovery reserve monies.
Fort Lauderdale is the largest city in Broward County and serves as one of the main metropolitan centers in South Florida. The city continues to experience strong population growth. The tax base is diverse with commercial property representing 40% of assessed value. The city's overall tax burden is slightly greater than surrounding jurisdictions in the county given its additional demands as a more mature urban community. Median household effective buying income is slightly below state and national averages, although income growth has been strong in recent years. Unemployment rates have risen to 10.9% as of September 2009 above 6.5% a year earlier and remains above state and national averages.
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