Moody's Investors Service said it has upgraded the rating on $46.7 million city of Tallahassee, Fla., outstanding parity capital refunding bonds to Aa2 from Aa3.
Moody's assigned a Aa2 to the city's $40.4 million capital bonds, Series 2014.
The outlook is stable. The bonds are secured by a priority lien on the pledged revenues, which consist of the city's communications services tax (CST) revenues, guaranteed entitlement (GE) revenues, local government half-cent sales tax revenues, and public service tax (PST) revenues.
Each tax is currently levied at its maximum rate, with the rates protected from repeal or impairment by the resolution. Security features include an additional bonds test of 1.25 times maximum annual debt service (MADS) for senior bonds, and no debt service reserve fund for this issue, which is a noted weakness.
The city has amended the master bond resolution to incorporate public service tax revenues into the definition of pledged revenues, which amendment affects the pledged revenues that secure the city's parity Series 2012 bonds. The city has a $21.2 million private placement bond (Series 2009) that has a subordinate lien on the pledged communications services tax revenues, guaranteed entitlement revenues, and half-cent sales tax revenues -- the public service tax revenues do not secure the Series 2009 bonds.
Proceeds will finance the construction of a new public safety facility and road improvements.
The Aa2 rating and upgrade reflects the consistently strong debt service coverage ratios afforded by the pledged revenues; the addition of a robust and stable new revenue source that itself covers maximum debt service; recent increases in most pledged revenues, several of which are levied on essential utility services; and satisfactory legal provisions.
The rating additionally incorporates the positive trend in the city's financial operations; healthy cash and reserves; low debt burden; and the stable nature of the Tallahassee economy.
