Citing declining sales tax revenue, Fitch Ratings Tuesday downgraded Jacksonville’s infrastructure sales tax revenue bonds to AA-minus from AA.
Fitch also revised the outlook to negative from stable on $573.2 million in outstanding sales tax bonds sold for the infrastructure improvement program known as the Better Jacksonville Plan, or BJP, approved by voters in 2000.
The rating downgrade was based on the projected decline in debt service coverage to levels inconsistent with a AA rating, Fitch said in a release.
“While coverage of maximum annual debt service (MADS) remained constant in fiscal 2008 at 1.42 times, year-to-date pledged sales tax revenues through February show a 5.8% decrease,” Fitch said. “If pledged revenues continue to decline at that rate through fiscal 2009, which Fitch believes is optimistic, coverage would decline to 1.34 times and would decline further if the drop in sales tax revenue continues beyond the current fiscal year.”
The negative outlook reflects analysts’ belief that the trend of weakening revenues may continue or even accelerate given the economic climate.
The AA rating on $534.4 million of outstanding BJP transportation revenue bonds was affirmed, but Fitch changed the outlook to negative from stable. It affirmed Jacksonville’s implied general obligation bond rating at AA.
The agency also affirmed $678.7 million of excise tax revenue bonds at AA; $132.7 million of local option sales tax bonds at AA; $153 million of capital improvement revenue bonds at AA-minus; $104.7 million of guaranteed entitlement revenue bonds at AA-minus; and $133.9 million of capital project revenue bonds at A-plus.
The affirmations were based on sound debt service coverage levels, some of which are higher than BJP debt levels, as well as satisfactory legal provisions, and the general credit characteristics of the city, Fitch said.
