Fitch Ratings assigns an ''A+'' rating to the following Osceola County, Florida (the county) sales tax revenue bonds:
--$43.3 million series 2010.
The bonds are expected to sell via negotiation the week of Feb. 16, 2010.
In addition, Fitch withdraws its rating for the following bonds which were not sold:
--$43.3 million billion sales tax revenue bonds, series 2009A ''A+''.
Fitch also affirms the following rating:
--$43.3 million in outstanding sales tax revenues bonds at ''A+'' (to be refunded with the current issuance).
The Rating Outlook is Stable.
RATING RATIONALE:
--The withdrawal of the rating on the series 2009A bonds and the subsequent assignment of a rating to the 2010 bonds does not affect the ''A+'' rating on the county''s outstanding sales tax revenue bonds or any other of its outstanding debt.
--Debt service coverage remains strong despite recent declines in coverage levels.
-The county''s economy is limited with a historic concentration in economically sensitive tourism.
-Wealth indicators are below average.
-The county has a history of strong financial results characterized by consistent surpluses and healthy reserve levels.
RATING DRIVERS:
--The potential incorporation of Poinciana Villages and continued annual declines in pledged revenues may put downward pressure on the rating.
--A continued downturn in the economy could have a magnified effect on the county''s tourism-driven economy.
SECURITY:
The bonds are secured by the county''s portion of the state half-cent sales tax.
CREDIT SUMMARY:
On a pro forma basis, current maximum annual debt service (MADS) coverage by audited fiscal 2008 sales tax revenue on this issuance and all outstanding parity debt is 2.1 times (x). An unaudited 10.5% decline in fiscal 2009 revenues reduced coverage to a still strong 1.86x. Year to date fiscal 2010 data shows a further moderate 2.7% decrease in pledged revenues. A feasibility study has been conducted on the potential incorporation of Poinciana Villages, which spans portions of Osceola and Polk counties. For the incorporation to take place, the state legislature would need to pass a bill allowing for incorporation which would be followed by a voter referendum in November 2010. Current estimates indicate the incorporated area would include roughly 17% of the county''s population.
Osceola County is located roughly 14 miles south of Orlando and adjacent to Disney World, leading to the county''s concentration in tourism. The Walt Disney Co. (rated ''A'' by Fitch with a Stable Outlook) employs 61,500 employees in Orange and Osceola counties while Osceola''s other large employers are largely tourism, retail, and health care related. A combination of the rapid population growth and Florida''s recent housing market bubble led to marked growth in assessed value (AV) which increased 140% in five years from fiscal 2003 to fiscal 2008. New construction accounted for approximately 39% of the increase. The current housing market correction has led to a moderate 1.3% decline in AV in fiscal 2009 and a 16.7% decrease for fiscal 2010. Unemployment has increased with the economic downturn to a high 13.3% for December 2009 from 8.7% a year prior.
Financially, the county has been consistently strong with surpluses in four out of the last five years. Fiscal 2008 ended a $3.5 million surplus increasing the unreserved fund balance to an ample 26.9% of spending. Unaudited results fiscal 2009 show a modest $1.2 million drawdown due to one-time capital projects for roads. The fiscal 2010 budget is balanced with no use of reserves. The county has proactively addressed recent Florida property tax reforms and the weakening tax base through a combination of personnel reductions, operating efficiencies, and the discontinuation of the sick leave payout program.
Overall debt levels are moderate at $2,931 per capita and 3.5% of market value although amortization is slightly below average with 42% of principal being retired within ten years. Capital needs are limited and concentrated in roads. Additional debt plans are limited to $25 million in limited GO bonds to purchase environmental lands next fiscal year.
These rating actions reflect the application of Fitch''s current criteria which are available at ''www.fitchratings.com'' and specifically include the following reports:
--''Tax-Supported Rating Criteria'', dated Dec. 21, 2009;
--''U.S. Local Government Tax-Supported Rating Criteria'', dated Dec. 21, 2009.
Additional information is available at ''www.fitchratings.com''.
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Contacts:
Fitch Ratings, New York
Rachel A. Barkley, 212-908-0514
Barbara
Rosenberg, 212-908-1731
or
Media Relations:
Cindy
Stoller, 212-908-0526
Email: cindy.stoller@fitchratings.com