BRADENTON, Fla. - Florida's 10-year-old environmental land acquisition program known as Preservation 2000, with $2.5 billion of outstanding debt, won upgrades from all three major rating agencies late last week, benefiting the new version of the program called Florida Forever.
Processing Content
The $50 million of Florida Forever revenue bonds, Series 2001A, expected to sell this week on 18-hours notice, received an AA-minus rating from Standard & Poor's, an A-plus rating from Fitch and an A1 from Moody's Investors Service. The bonds will be issued by the Florida Division of Bond Finance on behalf of the Florida Department of Environmental Protection.
Standard & Poor's raised its rating on the Florida Department of Environmental Protection's P2000 outstanding revenue bonds to AA-minus from A. The outlook is stable. Fitch upgraded its rating on the outstanding debt to A-plus from A. Moody's has upgraded the state's outstanding P2000 debt to A1 from A2.
"We're extremely pleased whenever we can get recognition that a credit is better than it had been rated in the past," said Ben Watkins, director of the Florida Division of Bond Finance. "That's a good thing for existing bondholders, as well as any interest rates we expect to be getting prospectively."
When it came time for the P2000 program to end, and to authorize another $3 billion environmental program last year, Watkins built additional strengths into the new Florida Forever program. Generally, the program's bond proceeds are used to purchase environmentally sensitive lands in order to preserve them.
The program's covenant was strengthened to prevent legislators from changing the percentage of revenue backing Florida Forever bonds. In the past, P2000 bonds were secured with 62.63% of the documentary stamp taxes collected each year on real estate transactions, stocks, bonds, debentures, and mortgages. However, legislators could change that percentage to fund other programs.
"Over time, they did lower the distribution into the land acquisition trust fund," said Standard & Poor's analyst Robin Prunty, explaining how the credit was strengthened. "Now, the percentage is fixed."
Another provision designates 7% of documentary stamp taxes collected for administrative fees to be used to pay debt service, if necessary.
Yet another difference in the two programs concerns the issuance of debt. In P2000, $300 million a year was issued whether it was needed or not. That resulted in the build-up of cash reserves and the use of some funds by the Legislature. Florida Forever will issue debt only when needed, a system that Watkins calls a "more cost-effective" model for borrowing based on need.
The Florida Division of Bond Finance serves as its own financial adviser. Bond counsel is Squire, Sanders & Dempsey.
The bonds may be insured, Watkins said.
