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Major League Deals in Florida

SEP 15, 2010 6:39pm ET
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BRADENTON, Fla. — Sarasota and two counties on Florida’s southwest coast plan to take advantage of federally subsidized economic recovery zone and Build America Bonds when they issue more than $100 million of debt for the spring-training facilities of two Major League Baseball teams.

The financing allowed under the federal stimulus law is being used by Lee County to build a new spring-training stadium for the Boston Red Sox. The team has played in a smaller facility in the county seat of Fort Myers since the early 1990s.

Sarasota and Sarasota County plan to use bonds to renovate an existing sports complex for the Baltimore Orioles, who are moving from Fort Lauderdale for newer digs.

The first sale is next week when Lee County will price $80 million of tourist development-tax revenue bonds.

Proceeds are being used to build a 10,000-seat stadium for the Red Sox, which includes up to six full-size practice fields, parking for 4,000 vehicles, and six community soccer fields. Proceeds also will reimburse the county for the $20 million cost of land.

The spring-training facility being built near Southwest Florida International Airport will allow the team to co-locate its practice fields with the ballpark. The Sox inked a 30-year deal to stay in the area after the county promised to build new facilities for the team.

The offering is expected to be structured as $36.3 million of Series 2010A taxable BABs with a 35% interest-rate subsidy, $37.4 million of Series B recovery zone economic development bonds with a 45% subsidy, and $6.3 million of Series C tax-exempt revenue bonds. The final maturity will be in 2040.

A commitment has been obtained from Assured Guaranty Corp. to insure some or all of the bonds, but a decision on purchasing a policy will be made when the bonds are marketed.

The county is using its entire allocation of recovery zone economic development bonds on the spring-training facilities.

The federally subsidized bonds were authorized by the American Recovery and Reinvestment Act and were designed to lower borrowing costs for local governments, promote job creation, and help spur economic recovery.

Next week’s deal “will generate jobs during construction and be an economic benefit to the county,” said county fiscal analyst James Lewin.

The bonds are expected to price Tuesday or Wednesday, depending on market conditions, he said.

“We’re just hoping that the market holds real well and that they price favorably,” Lewin said.

The bonds are rated AA-minus by Fitch Ratings and Aa3 by Moody’s Investors Service.

Analysts from both agencies said a number of common factors underpin their ratings, including low to modest debt levels, “ample” annual debt-service coverage, and no current plans to leverage the tax further.

Fitch said its rating also incorporated historically strong financial results that allowed the county to enter the recession with “robust reserves.”

“Despite a projected operating deficit in fiscal 2010, substantial financial flexibility remains as fund balances are expected to remain ample while additional revenue and expenditures options are still available,” the agency said.

Like most of Florida, Lee County’s economy is suffering from significant drops in assessed values.

Since 2008, the housing correction and state property tax reform have had a magnified effect on the county, with double-digit assessed value losses in fiscal 2009 and fiscal 2010, Fitch said.

Tax rolls for fiscal 2011 show another 14% decline, though less than the previous year’s 23% decrease. In total, assessed value has fallen 40% from its peak.

Lee County had a 12.5% unemployment rate in May, down from a peak of 14.2% in January.

“Despite the recent economic volatility, operating margins have generally been positive with additions to fund balance for the past four audited years,” Fitch said.

Fiscal 2009 ended with a $41 million surplus, increasing the unreserved fund balance to 59.5% of spending. The county has used a portion of reserves to soften revenue losses. Fiscal 2010 is projected to end with reserves above 45% of spending.

Lee County’s implied general obligation rating is AA from Fitch. Its issuer credit rating is Aa1 from Moody’s.

Dunlap and Associates Inc. is the county’s financial adviser.

Bank of America Merrill Lynch is the book-runner for next week’s sale, with Citi and Morgan Keegan & Co. also underwriting the deal.

Bond counsel is Nabors, Giblin & Nickerson PA and disclosure counsel is Bryant, Miller & Olive PA.

Sarasota and Sarasota County are hoping to sell $29 million of bonds before the authorization to sell BABs expires Dec. 31. Bond proceeds would be used to renovate an existing stadium as part of a deal to lure the Orioles away from Fort Lauderdale.

The city plans to sell $8.7 million of economic recovery zone bonds backed by a Florida sales tax rebate that is part of a state program designed to finance professional sports facilities to lure teams to the state or upgrade facilities to retain them.

Sarasota County plans to finance its portion of the deal by selling $11 million of economic recovery zone bonds and $9.29 million of BABs backed by a half-cent sales tax, according to rating reports released late last year.

The city and county were preparing to sell the bonds last fall when a normally routine court validation process was challenged by two local nonprofit organizations known as Sarasota Citizens for Responsible Government Inc. and Citizens for Sunshine Inc.

The groups claimed that some city and county elected officials violated the state’s Sunshine law by conversing with each other through e-mail about the Orioles deal before it received a final vote.

Circuit court judge Robert Bennett ruled in July that there may have been violations of the state law but that they were not “egregious or intentional.” The violations were cured by subsequent votes of the commissions in public meetings, the judge said.

Bennett also validated the bonds to be sold by the city and county. However, the two groups have appealed the validation to the Florida Supreme Court.

The state’s high court will not hear oral arguments in the case but justices have agreed to expedite their review because the authorization for BABs expires at year’s end, a source familiar with the case said.

The city of Sarasota and Sarasota County hope to receive a ruling clearing the way for the bond sale by October, the source said.

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