Fitch Ratings assigns an 'AA+' rating to approximately
$163.4 million State of Florida full faith and credit state board of
education public education capital outlay (PECO) bonds, 2002 series E,
for bids on 18 hours notice. Fitch also affirms the 'AA+' rating of
approximately $12 billion outstanding Florida full faith and credit
bonds.
Florida's general obligation bond rating, upgraded to 'AA+' on March 3, 2005, reflects a moderate debt burden, sound financial management practices, sizable reserves, and a robust, broad, service-based economy. Florida's full faith and credit bonds also carry a pledge of specific taxes for each type of debt. The state targets debt service levels equal to 6% of revenues. Key credit risks include large, primarily growth-related capital needs, especially for schools, and rapid growth of Medicaid spending, which must be contained.
Soaring state revenues have contributed to accumulation of large reserves. The state prudently has limited their use for operating expenditures. The stabilization fund, now nearly $1 billion, was held intact during the recession. Receipts surged in fiscal 2004, and combined budget stabilization and working capital balances grew to $3.5 billion, or 14.5% of revenues. Revenue projections recently were increased yet again, and fiscal 2005 is projected to end with $4.0 billion in balances, or 16.4% of revenues.
On April 11, the state's estimating conference increased general revenue forecasts for fiscal years 2005 and 2006 by another $1.1 billion for each year. In November 2004, the group had increased the fiscal 2005 forecast by $1.6 billion. Broad-based strength in consumer spending, business activity, construction, and real estate led to significant increases in projections for receipts of sales, documentary stamp, intangibles, and corporate income taxes. Fiscal 2005 general revenues have been forecasted to be 13.0% above those of fiscal 2004; fiscal 2006 revenues have been projected to climb another 3.8%. The legislatively passed budget for fiscal 2006 has been awaiting gubernatorial action.
Florida's economy continues its strong performance. In 2004, employment grew by triple the national rate, and for the 12 months ended April 2005, by 2.9%, significantly above the 1.7% national rate for the same period. Measures of wealth remain average; personal income per capita now ranks 23rd among the states at 96% of the U.S. level. Visitation has rebounded from the downturns of 2001-2002 and the 2004 hurricanes.
Debt places only a moderate burden on Florida's resources. Tax-supported debt equals 3.4% of personal income and consumes about 6% of revenues. Funding class size reduction will be a challenge in future years. Estimates of capital costs for this purpose have ranged as high as $9.4 billion.
A second lien on utility gross receipt taxes and Florida's full faith and credit secure PECO bonds now being issued. Fiscal 2004 pledged taxes cover maximum annual debt service (MADS) of both PECO liens by approximately 1.2 times (x). The closed first lien accounts for under 5% of debt service. Issuance of parity bonds requires 1.11x MADS coverage based on average receipts during the last 24 months. PECO bonds are the primary method the state uses to fund school construction.
The 2002 series E bonds mature June 1, 2006-2035, subject to a term bond designation option. Bonds are subject to optional redemption beginning June 1, 2015.
Florida's general obligation bond rating, upgraded to 'AA+' on March 3, 2005, reflects a moderate debt burden, sound financial management practices, sizable reserves, and a robust, broad, service-based economy. Florida's full faith and credit bonds also carry a pledge of specific taxes for each type of debt. The state targets debt service levels equal to 6% of revenues. Key credit risks include large, primarily growth-related capital needs, especially for schools, and rapid growth of Medicaid spending, which must be contained.
Soaring state revenues have contributed to accumulation of large reserves. The state prudently has limited their use for operating expenditures. The stabilization fund, now nearly $1 billion, was held intact during the recession. Receipts surged in fiscal 2004, and combined budget stabilization and working capital balances grew to $3.5 billion, or 14.5% of revenues. Revenue projections recently were increased yet again, and fiscal 2005 is projected to end with $4.0 billion in balances, or 16.4% of revenues.
On April 11, the state's estimating conference increased general revenue forecasts for fiscal years 2005 and 2006 by another $1.1 billion for each year. In November 2004, the group had increased the fiscal 2005 forecast by $1.6 billion. Broad-based strength in consumer spending, business activity, construction, and real estate led to significant increases in projections for receipts of sales, documentary stamp, intangibles, and corporate income taxes. Fiscal 2005 general revenues have been forecasted to be 13.0% above those of fiscal 2004; fiscal 2006 revenues have been projected to climb another 3.8%. The legislatively passed budget for fiscal 2006 has been awaiting gubernatorial action.
Florida's economy continues its strong performance. In 2004, employment grew by triple the national rate, and for the 12 months ended April 2005, by 2.9%, significantly above the 1.7% national rate for the same period. Measures of wealth remain average; personal income per capita now ranks 23rd among the states at 96% of the U.S. level. Visitation has rebounded from the downturns of 2001-2002 and the 2004 hurricanes.
Debt places only a moderate burden on Florida's resources. Tax-supported debt equals 3.4% of personal income and consumes about 6% of revenues. Funding class size reduction will be a challenge in future years. Estimates of capital costs for this purpose have ranged as high as $9.4 billion.
A second lien on utility gross receipt taxes and Florida's full faith and credit secure PECO bonds now being issued. Fiscal 2004 pledged taxes cover maximum annual debt service (MADS) of both PECO liens by approximately 1.2 times (x). The closed first lien accounts for under 5% of debt service. Issuance of parity bonds requires 1.11x MADS coverage based on average receipts during the last 24 months. PECO bonds are the primary method the state uses to fund school construction.
The 2002 series E bonds mature June 1, 2006-2035, subject to a term bond designation option. Bonds are subject to optional redemption beginning June 1, 2015.
© 2005 Business Wire
