Moody’s Investors Service last week downgraded Collier County’s capital improvement revenue bonds to A2 from A1.
The lower rating affects $218 million in outstanding debt and reflects narrower coverage levels resulting from a significant drop in the sales tax revenue that secures the bonds, analysts said.
Sales tax revenue declined 23% over the past four years, and coverage of debt service is projected to decline to an average 1.38 times in fiscal 2009, significantly lower than the 1.79 times coverage in fiscal 2006, Moody’s said. An additional decline of 7% is projected for fiscal 2010.
Moody’s also affirmed Collier County’s other ratings, including its Aa2 issuer rating, Aa3 limited-tax general obligation rating on $31 million of conservation bonds, and A2 gas tax revenue rating on $160 million of outstanding debt.
“Collier County is expected to retain strong long-term credit strength despite a financial position challenged both by property tax limitations and planned reserve draws as well as recessionary pressure on tax base valuation,” Moody’s said.
The county’s sizeable $70 billion tax base, with solid demographic characteristics and favorable location on Florida’s southwest coast, has experienced declines totaling $12.5 billion since fiscal 2008. An additional reduction of up to 15% is projected for the fiscal 2011 valuation.
“Although medium-term growth is anticipated to be minimal, the long-term outlook for Collier’s local economy remains robust,” Moody’s said. “The county’s historically strong financial position is expected to weaken somewhat in the near term as operations remain strained due to property tax-levy limitations and additional planned draws on general fund reserves.”