Standard & Poor's last week dropped Sarasota County's limited ad valorem tax bonds four notches to BBB from A-plus.

The action affects about $109.6 million of outstanding bonds. The outlook remains negative.

The downgrade reflects continuing declines in property values resulting in reduced pledged revenue for maximum annual debt-service coverage, the agency said.

The negative outlook reflects the potential for further property value declines, which could result in pledged revenue providing less than 1 times MADS coverage.

"Additional debt-service coverage declines could lead to our lowering the rating further by one or more notches," said Standard & Poor's analyst Lindsay Wilhelm. "Alternatively, evidence of tax-base stabilization or strong growth could result in our revising the outlook to stable or raising the rating."

Wilhelm said the rating also reflects the limited nature of the pledge securing the bonds, the county's ongoing tax base weakness into fiscal 2012, and the marginal coverage of maximum annual debt service and annual debt service.

A limited 0.25-mill rate on all taxable property in the county secures the bonds. Voters authorized the bonds for environmentally sensitive land acquisitions, protection and maintenance in a 1999 voter referendum.

The authorization is in place through 2029.

The county's taxable property values declined by 53% over the past five years to $39.5 billion for fiscal 2012, according to preliminary estimates.

The current millage rate provides 1.1 times MADS coverage, which is the required level under the additional bonds test.

Standard & Poor's estimates a decrease of 6.6% in taxable property value would result in coverage dropping below the required level.

According to IHS Global Insight, the local housing market is showing signs of stabilizing with home sales on the rise due to increased affordability. However, the report also indicates home prices still have room to decline.

Sarasota is typically known for its large and wealthy population of retirees. Tourism and service industries are top components of the county's economy.

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