Fitch Rates Okaloosa County, Florida's Sales Tax Rev Bonds 'A+'

The 'A+' rating on the sales tax revenue bonds reflects the robust debt service provided by pledged revenues and adequate legal provisions as well as the general credit characteristics of the county, including low debt levels, manageable capital needs, and adequate financial flexibility. Also factored into the rating is the county's stable economy, sound wealth levels, and a below average unemployment rate.

The bonds are secured by the county's portion of the local government half-cent sales tax. The state levies a 6% sales tax and distributes the revenue collected within each county to the respective county and its incorporated municipalities according to a population-based formula. Approximately 68% of total revenues have historically been awarded to the county. On a pro-forma basis, maximum annual debt service (MADS) coverage by audited fiscal 2008 revenues totaled 8.2 times (x). Projected fiscal 2009 results show a 9% decline in pledged revenues reducing coverage to a still strong 7.5x. The county has no current plans to further leverage the security and coverage is expected to remain high as excess revenues are needed to support general government operations. Legal provisions are adequate requiring 1.35x MADS coverage to issue additional debt. This is the first time the county is securitizing the sales tax.

Financial operations have improved in recent years as the county experienced general fund surpluses in the last five audited years, increasing the unreserved fund balance to an adequate 6% of spending at the end of fiscal 2008. Fiscal 2009 estimates show breakeven results. The county has chosen not to increase the millage rate in either fiscal 2009 or fiscal 2010 and instead to offset the relatively mild tax base losses by reducing expenditures, including decreasing capital spending and monitoring general efficiencies. The fiscal 2010 budget is balanced with no use of reserves.

Debt levels are quite low at $705 per capita and 0.8% of taxable assessed valuation (TAV). Capital needs are manageable with a five-year CIP totaling $109.8 million. The plan is fully funded with no additional debt plans.

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