Fitch Ratings on Monday downgraded the Orlando Community Redevelopment Agency’s tax-increment financing revenue bonds to A from A-plus.
The action applies to $146.3 million of outstanding TIF bonds that financed a portion of the funding for a new performing arts center in downtown Orlando. Fitch said the rating outlook is stable.
The downgrade reflects a decrease in debt-service coverage from pledged revenues as a result of tax base declines, according to Fitch analyst Barbara Ruth Rosenberg.
“Fitch believes the vitality of the area will contribute to the stable long-term prospects for the tax base,” Rosenberg said. “The A rating captures the current coverage levels as well as Fitch’s expectation that coverage will remain relatively static in the near term as assessed valuations stabilize.”
Maximum annual debt-service coverage is an estimated 1.5 times for fiscal 2012. Rosenberg said coverage is notably below the 1.8 times anticipated in 2010 as a result of declining taxable values.
The coverage calculation includes revenue from the taxable Build America Bonds subsidy. Though the BABs subsidy is not pledged in bond documents it must be applied by the CRA in the same manner as pledged revenues, she said.
“City officials anticipate appropriating reserves to balance the CRA’s budget over the intermediate term, although actual use is contingent upon revenues received,” Rosenberg said. “The CRA is expected to remain in compliance with its reserve policy, providing some additional cushion against revenue fluctuations.”
