Moody's Investors Service has assigned a Aa3 rating to the city of Port St. Lucie, Fla.'s $55.2 million general obligation bonds, Series 2013, and downgraded $84.3 million of outstanding general obligation bonds to Aa3 from Aa2 (includes portions of pre-refunding Series 2005 general obligation bonds), and $179.9 million of certificates of participation and non-ad valorem backed conduit, lease (pre-refunding Wyndcrest Project bonds) and special assessment debt to A1 from Aa3.
The outlook is stable.
Proceeds will advance refund certain maturities of the Series 2005 general obligation bonds and provide new money for the penultimate phase of the Crosstown Parkway project.
The downgrade of the general obligation rating reflects the continued weak economic recovery, the recent deterioration of non-ad valorem backed debt that has invoked general fund support, and the expectation of structurally imbalanced operations for the next four fiscal years as the city has elected to fund this support from general fund reserves rather than from new revenues.
While the city retains considerable tax rate flexibility within the ten mill limit, uncertainty remains over how it will support CRA debt service (initial support estimated in fiscal 2017) or other potential claims, most notably the Southwest Annexation Special Assessment District (SAD) debt ($10 million/year) and/or Vaccine and Gene Therapy Institute (VGTI) debt ($4.1 million/year), whose support would place material pressure on city finances.
Despite indications of improvement, the local economy remains weak, with elevated rates of foreclosures, home inventory and unemployment relative to the state. While the city's direct debt burden is currently elevated, Moody's expects it to improve with the conclusion of the multi-year capital investment initiative that will position the city favorably in anticipation of the population increase it should experience.
Further, its pension liability is comparatively well contained with three of the four single-employer plans represented by defined contribution plans.
