Fitch Ratings affirms the 'A+' rating on approximately $52.8 million of State Board of Governors parking facility bonds issued on behalf of Florida International University (FIU).
The Rating Outlook is Stable.
SECURITY
Parking revenue bonds are secured by and payable from pledged net revenues derived from student transportation access fees assessed to all FIU students and operation of its parking system.
KEY RATING DRIVERS
Universal Fee: FIU's parking system (the system) is fully self-supporting, funded primarily by a mandatory student transportation fee assessed to all students.
Strong Financial Performance: The parking system consistently generates a positive operating margin and sound coverage of system related debt carrying charges.
Enrollment Fuels Parking Demand: Stable and consistent enrollment growth results in sustained demand and full utilization of parking system facilities.
High Debt Burden: Continuing concerns include the parking system's high debt burden (36.5% of operating revenues) and ongoing capacity pressures as a result of FIU's increasing enrollment; the parking system expects to fund an expansion to the system over the next year through the issuance of additional debt.
CREDIT PROFILE:
Strong System Operations Produce Adequate Debt Service Coverage
System margins have been strong, averaging over 30% for the past five fiscal years. System revenues are primarily derived from a mandatory student transportation fee assessed to all FIU students. The transportation access fee (fee) supports the system's operations and is typically increased ahead of approved capital projects to generate revenues sufficient to support pro forma debt service. The fee was increased 5% in fall 2010 and another 5% fee increase is expected next year in anticipation of additional debt ($33.5 million) to be issued in calendar 2012.
As a result of the system's positive operating performance, net system revenues available for debt service (pledged revenues) typically provide adequate coverage. Pledged revenues for fiscal 2010 totaled $7.1 million, covering pro forma maximum annual debt service (MADS) of $5.6 million by 1.28 times (x). Pledged revenues for fiscal 2011 are conservatively projected at $6.8 million, providing 1.22x MADS coverage.
Growing Enrollment Increases Demand For Parking
Enrollment growth at FIU drives strong demand for the system; headcount for FIU increased to over 43,000 students in fall of 2010 (currently estimated at over 44,000), from just below 40,000 students in fall of 2010. FIU's strategic plan anticipates adding 2,000 students per year, achieving a total enrollment figure of 52,000 by 2015. FIU's enrollment growth is prompted by affordable tuition for in-state students and popular undergraduate and graduate business programs. Such demand characteristics, common to a number of Florida public educational institutions, support sound financial performance of auxiliary enterprises, including housing and parking.
Light Balance Sheet Resources Coupled With On Going Capital Needs
As is typical of university auxiliary enterprises, the system has limited liquidity. Available funds, defined as cash and investments not permanently restricted, totaled $15.3 million in fiscal 2010 and comprised 181% of operating expenses and 29% of debt. As a result of the system's 2009 debt issuance, the debt burden is quite high at 36.5% of fiscal 2010 operating revenues. The debt burden will be further pressured by the expected issuance of approximately $33.5 million in additional parking debt in calendar 2012. Given FIU's continuing growth, the universal nature of the fee and strong demand for parking, Fitch anticipates that this additional borrowing will be accompanied by a commensurate growth in resources sufficient for the increase in debt service.
With a headcount of 44,000 students, FIU is one of 11 institutions of higher education in the State University System of Florida ('AA', Stable Outlook). The mandatory transportation access fee is assessed to all students, entitling them to park at any of the FIU campuses although a majority of the system facilities are located at the Modesto A. Maidique and Biscayne Bay campuses. FIU is the largest university in South Florida operating out of two main campuses in southwest Miami-Dade County and North Miami County, with additional satellite campuses located in Broward County.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'U.S. College and University Rating Criteria' (July 14, 2011);
--'Revenue-Supported
Rating Criteria' (June 20, 2011).
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Applicable Criteria and Related Research:
U.S. College and
University Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=640830
Revenue-Supported
Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130
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