BRADENTON, Fla. - Market conditions have made this week's sale of the Palm Beach County Solid Waste Authority's $72 million combined refunding and new-money revenue bonds difficult to schedule, but officials say investors seeking high-quality Florida paper should find the anticipation worth the wait.
The transaction consists of $31.6 million of refunding bonds, Series 2002A, and $41.2 million of improvement revenue bonds, Series 2002B. A final decision on whether the bonds will be insured has not been made.
The new money will finance the construction of a transfer station and a warehouse along with related improvements that basically will complete the county's capital needs until approximately 2020 when borrowing will be necessary to develop a new landfill.
The remainder of the proceeds will refund the outstanding maturities of the authority's Series 1992 bonds which were expected to bring present-value savings of 4.3% last week before the market's current upswing in yields.
"The market doesn't look that good. We are not in a great hurry to sell," said Palm Beach financial adviser Clark Bennett, managing director at Spectrum Municipal Services Inc. He added that the refunding savings had not slipped a "great deal" but since the county was not in a hurry for the new money he wanted to proceed cautiously.
The sale is accompanied by two rating upgrades that bring Palm Beach into the double-A category, which is rare for the often volatile waste-to-energy sector.
Moody's Investors Service assigned a Aa3 rating last week while upgrading the authority's underlying rating on $316 million of outstanding parity debt to Aa3 from A1. Standard & Poor's rated the upcoming sale AA-minus while upgrading its underlying rating to AA-minus from A. Fitch Ratings was not asked for a review of the credit.
Salomon Smith Barney Inc. is the lead manager with A.G. Edwards & Sons Inc., Capital Market Investment LLC, and Merchant Capital LLC on the underwriting team. Bond counsel is Edwards & Angell LLP.
Behind the rating upgrades is recognition by analysts of the strong structure Palm Beach uses to ensure residences and businesses pay their bills.
"We can assess every piece of improved property in the county," said Charles Maccarrone, director of financial management services for the Palm Beach authority. "The assessment is on the tax bill and the tax collector cannot take a partial payment on the tax bill."
Another unique aspect is the incentive program that offers employees annual bonuses for meeting certain priorities. The primary goal is operating efficiently, Maccarrone said, which has enabled the authority to lower or keep water and sewer rates the same since 1994.
"The Aa3 rating further reflects the authority's substantial levels of liquidity and continuing growth in its waste stream and very wealthy service area," said Moody's analyst Aaron Freedman in a review of the credit.
The authority operates an integrated solid-waste disposal system, coterminous with the boundaries of Palm Beach County, which includes a resource recovery facility and landfills, among other components.
"I think however investors look at our business -- when they look at finances and creditworthiness, what they do and how they do it -- when they look at those things, it's a pretty strong argument for investing in the solid-waste authority," Maccarrone said.
