NEW YORK - (Business Wire) (This is an update to the release that went out earlier on Aug. 25, 2008; it updates the amount of principal outstanding and corrects and clarifies various details.)
In the course of surveillance, Fitch affirms Collier County, Florida as follows:
--Implied general obligation (GO) at 'AA';
--Approximately $230 million capital improvement revenue bonds at 'AA-';
--Approximately $170 million gas tax revenue bonds at 'A+';
The Rating Outlook is revised to Negative from Stable.
The Negative Outlook reflects Fitch's growing concern that the effect of the housing market's deterioration on the economy will put stress on the county's finances, as well declines in sales and gas taxes that provide security for Fitch-rated bonds. According to Office of Federal Housing Enterprise Oversight (OFHEO) data, home price appreciation in Collier County was among the fastest in the country between 2005 and 2006 and its decline has been equally steep. Based on Fitch's residential mortgage backed securities (RMBS) data, which includes only a subset of mortgage activity, delinquencies and foreclosures in the county have increased to approximately four and 10 times (x) its 2000-2003 recessionary peak respectively. Additionally, the county has had difficulty selling tax certificates at auction and the collection rate has declined slightly to 95% from typical levels above 96%. A decline in construction employment, which provided 20% of county employment at the peak in 2006, has led to a leap in unemployment to 6.5% in June 2008 from 4.5% in June of 2007.
The implied 'AA' rating on the county's GOs reflects the county's sound management, wealthy population, and moderate debt levels. The county has been proactive in adjusting expenditures in line with declining revenues and initial cuts have not impacted services. The county expects general fund ad valorem tax revenue to be down $11 million or 5% in fiscal year 2009. The majority of cuts have been in the personal service category and throughout the capital improvement program. The county's tax rate is 3.15 mills, well below the 10 mill cap under Florida law. Taxable assessed value (TAV) has grown an average of 15% each year since 2001, but had a slight decline for 2009. General fund unreserved fund balances remained a healthy 22% of total expenditures at the end of fiscal year (FY) 2007. Debt levels are moderate; direct debt is equal to $1,497 per capita or 0.67% of market value. Because of the recent downgrades of MBIA and Ambac by Moody's the county must cash fund the reserves previously funded through surety bonds with monolines that have been downgraded. Per the bond documents, the capital improvement revenue bonds' reserve must be funded with approximately $7 million within a year. Although not required by bond documents, the city intends to fund the gas tax bonds reserves, series 2003 and 2005, with $2.7 million and $10 million respectively.
The 'AA-' rating on the 2002, 2003, and 2005 capital improvement bonds secured by sales taxes reflects solid coverage, which is estimated to be 1.51x maximum annual debt service (MADS) in FY08. Sales tax revenues declined 5% in fiscal years 2007 and 9% in the first 3 quarters of 2008. Coverage remains satisfactory, largely because of a slightly declining debt service schedule. Further sales tax decline has the potential to erode comfortable coverage ratios.
The 'A+' rating on the gas tax revenue bonds reflects the weaker coverage ratios for the gas tax and a higher potential volatility in the revenue stream which is estimated to cover MADS 1.32x in FY08. The revenue decline for the gas tax has not been as steep as the sales tax: it declined 2% in 2007 and an additional 2% in the first 3 quarters of 2008. Coverage is currently below the ABT of 1.35x MADS, and has declined since its high of 1.38x MADS in 2005.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, New York
Drake Richey, +1-212-908-0325
Amy Laskey, +1-212-908-0568
Cindy Stoller, +1-212-908-0526 (Media Relations)
