NEW YORK - (Business Wire) Fitch Ratings has assigned an 'A+' to approximately $156,690,000 million Florida Department of Environmental Protection Florida Forever revenue bonds, series 2008B. Fitch has also affirmed the 'A+' rating of the Florida Department of Environmental Protection's approximately $2.5 billion outstanding Preservation 2000 and Florida Forever bonds, $200 million of outstanding Florida Everglades bonds, and $34 million of outstanding Save Our Coast bonds. The Rating Outlook is Stable.
The rating considers the volatility of the pledged documentary stamp tax and the projected debt service coverage currently afforded by the security. Fitch's downgrade of the rating this year reflected the rapidity and depth of revenue loss associated with the state's real estate correction, and its impact on debt service coverage. Various covenants protecting the allocated share of revenues underpin the rating. Pledged revenues declined 25.3% in fiscal 2007 and are now estimated to decline 35.6% further in fiscal 2008. While projected maximum annual debt service (MADS) coverage on bonds outstanding after this issuance is anticipated to remain satisfactory at approximately 2.7 times (x) by fiscal 2008 estimated collections, coverage is down from nearly 6.0x by fiscal 2006 collections. The Stable Rating Outlook reflects sound projected debt service coverage levels at the 'A+' rating level, the rapid amortization of existing debt with a large portion of debt retired by fiscal 2014, and the state's control and flexibility of future debt issuance.
The 2008 legislature increased to 63.31%, from 62.63%, the pledged portion of the documentary stamp taxes that must be first used for payment of debt service. In the event of revenue insufficiency, a prior 7% general fund service charge and administrative costs would be waived under state law. Net of the service charge and costs, pledged revenues more than tripled to $2.36 billion from fiscal 2001 to fiscal 2006 - during a period of low mortgage rates, second home buying, and increased investment in homes and condominiums - generally described as a housing boom. In fiscal 2007, pledged receipts plummeted 25% to under $1.77 billion, as the state entered a housing market correction evidenced by significant declines in housing starts, existing home sales and sale prices, and a rapid rise in mortgage delinquencies and foreclosures.
Florida (the state) holds revenue-estimating conferences that meet at least twice a year to revise economic projections, including those assumptions used to derive estimated documentary stamp tax collections. Estimated receipts have been downwardly revised multiple times since the spring of 2006. The last conference, held in March, reduced further the projected fiscal 2008 pledged revenues. Fiscal 2008 pledged revenues are now anticipated to drop nearly 35.6% from fiscal 2007 levels and revenue growth is not anticipated to return until fiscal 2010. The March revision may prove optimistic as May 2008 receipts were 46.5% below May 2007 collections, although year-to-date collections were 35.1% below last year's level. Estimated fiscal 2008 pledged taxes cover MADS in fiscal 2009 after this sale by approximately 2.7x and cover projected MADS in 2012 by 2.4x, assuming full issuance under the existing debt authorizations for the Preservation 2000, Florida Forever, and Everglades Restoration programs. The latter pro forma debt service coverage ratio does not take into account the recent authorization by the 2008 legislature to extend the Florida Forever and Everglades Restoration programs beyond fiscal 2010. A statutory limitation on annual and total debt service from the pledged revenues for the Florida Forever program was not increased, effectively requiring future legislative action for actual issuance to occur.
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Fitch Ratings, New York
Kyle R. Gephart, 212-908-0661
Richard Raphael, 212-908-0506
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