Fitch Ratings assigns an initial implied general
obligation (GO) bond rating of 'A-' to Homestead, FL. The rating is
not associated with an upcoming bond sale, and the city has no plans
to issue bonds at this time. The Rating Outlook is Stable.
The 'A-' implied GO rating is based on the city's stable financial position, low direct debt burden, and improved tax base growth in recent years. Also considered are the potential operating pressures related to the rapid tax base growth coupled with a high concentration of real estate developers among the city's top 10 taxpayers. Currently, nine of the top 10 taxpayers are real estate developers. With a high number of residential units coming online, the city is estimating over 9,000 units over the next five years, a potential downturn in the real estate market could prove difficult for developers to sell their properties, in turn leaving the city dependent on a small number of taxpayers who are responsible for a high percentage of the city's property taxes.
Homestead is located in Miami-Dade County in southeastern Florida, approximately 35 miles south of the City of Miami. The city enjoys close proximity to the Florida Keys and the Miami International Airport (revenue bonds rated 'A' by Fitch) and is home to the Homestead-Miami Speedway, a popular destination for NASCAR events held annually. In 1992, Homestead was struck by Hurricane Andrew, prompting a significant decline in population, crippling the local economy and forcing the nearby Homestead Air Force Base to dramatically scale back its operations and staff. Although population and tax base growth were stagnant while the city was in recovery mode during the 1990s, posthurricane clean-up left a large amount of vacant land that is now being developed and purchased rapidly. Despite losing approximately 7,000 residents immediately after the hurricane, population has grown 34% in the past 15 years. Assessed valuation growth has recovered in recent years, increasing 45% in fiscal 2005 and averaging 31% per year over the past five years. Unemployment rates that have historically been above those of the state and nation declined over the past year, from 6.9% in July 2004 to 5.1% in July 2005. Income levels are well below those of the state and nation.
Finances are stable, with healthy cash balances and sufficient reserves. Significant tax base growth has allowed the city to reduce its historically high tax rate to 6.5 mills in fiscal 2006 from 8.5 mills in fiscal 2003. The city ended fiscal 2004 with a $4.7 million surplus in the general fund leading to an undesignated reserve of $13 million and equaling 60% of spending and transfers out. Undesignated reserves grew 131% from fiscal years 2002-2004, largely a result of license and permit revenue that has doubled over the same period due to the significant increase in residential construction. While license and permit revenue represented 33% of general fund revenue in fiscal 2004, a significant increase from 7% in 2001, reliance on property tax revenue declined to 25% of general fund revenue from 33% over the same period. Fiscal 2005 is expected to result in a $2.4 million operating surplus.
Direct debt levels are currently low at 1.3% of market value and $523 per capita and should remain so given that the city has no plans to issue bonds at this time. The 2006-2012 capital plan identifies $76.6 million in spending, mainly for general government needs and the solid waste, electric, and water and sewer utility systems. The capital plan is fully funded with one-third covered by pay-as-you-go and almost half supported by user fees.
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.
The 'A-' implied GO rating is based on the city's stable financial position, low direct debt burden, and improved tax base growth in recent years. Also considered are the potential operating pressures related to the rapid tax base growth coupled with a high concentration of real estate developers among the city's top 10 taxpayers. Currently, nine of the top 10 taxpayers are real estate developers. With a high number of residential units coming online, the city is estimating over 9,000 units over the next five years, a potential downturn in the real estate market could prove difficult for developers to sell their properties, in turn leaving the city dependent on a small number of taxpayers who are responsible for a high percentage of the city's property taxes.
Homestead is located in Miami-Dade County in southeastern Florida, approximately 35 miles south of the City of Miami. The city enjoys close proximity to the Florida Keys and the Miami International Airport (revenue bonds rated 'A' by Fitch) and is home to the Homestead-Miami Speedway, a popular destination for NASCAR events held annually. In 1992, Homestead was struck by Hurricane Andrew, prompting a significant decline in population, crippling the local economy and forcing the nearby Homestead Air Force Base to dramatically scale back its operations and staff. Although population and tax base growth were stagnant while the city was in recovery mode during the 1990s, posthurricane clean-up left a large amount of vacant land that is now being developed and purchased rapidly. Despite losing approximately 7,000 residents immediately after the hurricane, population has grown 34% in the past 15 years. Assessed valuation growth has recovered in recent years, increasing 45% in fiscal 2005 and averaging 31% per year over the past five years. Unemployment rates that have historically been above those of the state and nation declined over the past year, from 6.9% in July 2004 to 5.1% in July 2005. Income levels are well below those of the state and nation.
Finances are stable, with healthy cash balances and sufficient reserves. Significant tax base growth has allowed the city to reduce its historically high tax rate to 6.5 mills in fiscal 2006 from 8.5 mills in fiscal 2003. The city ended fiscal 2004 with a $4.7 million surplus in the general fund leading to an undesignated reserve of $13 million and equaling 60% of spending and transfers out. Undesignated reserves grew 131% from fiscal years 2002-2004, largely a result of license and permit revenue that has doubled over the same period due to the significant increase in residential construction. While license and permit revenue represented 33% of general fund revenue in fiscal 2004, a significant increase from 7% in 2001, reliance on property tax revenue declined to 25% of general fund revenue from 33% over the same period. Fiscal 2005 is expected to result in a $2.4 million operating surplus.
Direct debt levels are currently low at 1.3% of market value and $523 per capita and should remain so given that the city has no plans to issue bonds at this time. The 2006-2012 capital plan identifies $76.6 million in spending, mainly for general government needs and the solid waste, electric, and water and sewer utility systems. The capital plan is fully funded with one-third covered by pay-as-you-go and almost half supported by user fees.
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.
© 2005 Business Wire
