Brevard County, along Florida’s space coast where NASA’s shuttle missions are launched, saw its local option fuel tax bonds downgraded to Baa1 from A3 by Moody’s Investors Service on Tuesday.
Moody’s retained a negative outlook on $92 million of outstanding debt, which is secured by the county’s share of a six-cent local tax on every gallon of fuel sold.
“The rating downgrade and negative outlook reflect the significant leveraging of this security as well as the negative trend in gas tax receipts,” Moody’s said. “A continued decline in pledged gas tax receipts would result in a further rating downgrade for the county.”
Tax collections have dipped over the past four years, with a 6.5% drop in fiscal 2008 and a 3.8% decline in the first seven months of fiscal 2009. Maximum annual debt service coverage fell to 1.19 times in fiscal 2008. If collections continue to fall at the same pace through the end of the current fiscal year, Moody’s expects projected coverage to decline to “an extremely narrow 1.14 times.”
Brevard is one of the principal locations of the nation’s space program, which is phasing out the shuttle program next year, presenting an economic challenge for the county, analysts noted. It has a population of more than 530,000 and a property tax base valued at $68.5 billion in 2008.
“Moody’s expects the county’s financial position to remain adequate given the county’s commitment to increasing its general fund balance and recently-enacted reserve policies,” Moody’s said. It added that Brevard has had surpluses in each of the last five years and currently has adequate liquidity with 77.9% of the general fund balance available.
In addition to significant property tax losses, county officials anticipate sales tax revenues to decline by 10%. They also project a $17 million gap in the general fund in fiscal 2010 with $7 million being offset by suspending capital projects and the remainder coming through cuts.
“Moody’s expects that the county’s debt burden should remain manageable given the sizable tax base, limited borrowing plans, and average payout of debt,” the agency said.