BRADENTON, Fla.— Standard & Poor's has lowered to AA-plus from AAA the issuer credit rating of the South Florida Water Management District, citing recent legislative changes that "significantly reduced the district's financial flexibility."
At the same time, the agency downgraded the district's certificate of participation rating to AA from AA-plus. The outlook is stable.
As of Sept. 30, 2010, the district had $944.5 million of COPs outstanding though 2037.
Senate Bill 2142, which Gov. Rick Scott signed in May, "greatly diminishes SFWMD's financial flexibility by capping the amount of revenues it can raise through ad valorem taxation in fiscal 2012 and requiring legislative approval of future budget and millage rates," said Standard & Poor's analyst John Sugden-Castillo.
"The caps are intended to provide property tax reductions to Floridians," he said, noting that before the new state law was signed, the district had maintained "a significant ability to raise ad valorem tax revenues" up to 0.8 mills.
SB 2142 applies to all five of Florida's water management districts, which provide regional flood control and manage water quality and environmental resources.
The new law requires districts to reduce property taxes an average of 30%.
As the largest of the districts covering all or a portion of 16 counties, including the Florida Everglades, the SFWMD had a $1.07 billion budget for 2011 that supported by $697.8 million of ad valorem taxes.
Capital expenses, many of them funded by bond proceeds, were a large portion of the 2011 budget, according to Sugden-Castillo.
The new law required the district to cut property taxes by $128 million. Its budget for 2012 budget is $557 million, which required eliminating 270 full-time positions, other budget cuts, and using $25 million in fund balance, he said.
The downgrades were "not unexpected given current fiscal conditions," the district said in a statement.
"The district has no plans to issue further debt in the foreseeable future and continues to place its credit worthiness and payment of existing debt as one of the agency's highest priorities," the statement said, adding that the lower ratings are still categorized as 'high grade.'"
Standard & Poor's said the district benefits from strong executive and legislative oversight of its budget, requiring approval from the governor and the Legislature. It also has strong management practices and policies.
The district has $421 million in unreserved and designated funds, though it plans to spend down $358 million in the next five years, Sugden-Castillo said.
Standard & Poor's last week also affirmed its A-plus ratings on the district's $36.16 million of Series 2002 and 2003 special obligation land acquisition refunding bonds. The outlook is stable.
The COPs are rated Aa3 by Moody's Investors Service and AA by Fitch Ratings. The special obligation refunding bonds are rated A2 by Moody's and A by Fitch.