BRADENTON, Fla. - In the first downgrade of a state-level credit in Florida in years, Fitch Ratings yesterday dropped the rating on the state's environmental bond programs to A-plus from AA-minus, citing the "rapidity and depth of revenue loss associated with the state's real estate correction and its impact on debt service coverage."
The downgrade affects the state Department of Environmental Protection's $2.6 billion of outstanding Preservation 2000 and Florida Forever bonds, $100 million of outstanding Florida Everglades bonds, and $60 million of outstanding Save Our Coast bonds. Fitch said the rating outlook is stable at the lower rating.
All of the bonds are secured by a tax on real estate sales, known as the documentary stamp tax, collections from which have plummeted due to shrinking real estate sales. Fitch's downgrade comes as the state is preparing to sell $99.7 million of Everglades restoration revenue refunding bonds.
"The rating considers the volatility of the pledged documentary stamp tax and the projected debt service coverage currently afforded by the security," said a report by Fitch analyst Kyle Gephart. "Various covenants protecting the allocated share of revenues underpin the rating."
Gephart said pledged revenues declined 25.3% in fiscal 2007 and are now estimated to decline 35.6% further in fiscal 2008. Projected maximum annual debt service coverage on bonds after the upcoming refunding is anticipated to remain satisfactory at nearly 2.9 times by fiscal 2008 collections.
The stable rating outlook reflects sound projected debt service coverage levels at the A-plus rating level, the rapid amortization of existing debt with a large portion of debt retired by fiscal 2014, and the state's control and flexibility of future debt issuance, said Gephart.
Fitch assigned the lower A-plus rating to the upcoming refunding for which a sale date has not been set. Moody's Investors Service rated the refunding bonds A1 with a stable outlook, while Standard & Poor's assigned a AA-minus rating and stable outlook.
Moody's on March 19 placed a negative outlook on Florida's general obligation debt rating and certificates of participation out of concern over the state's waning economy. At the same time, Moody's affirmed its Aa1 GO rating and its Aa2 COP rating. Florida's GO rating is AAA by Standard & Poor's and AA-plus by Fitch.