Water District COPs Drop

Fitch Ratings on Tuesday downgraded the South Florida Water Management District’s certificates of participation to AA-minus from AA, citing a new Florida law restricting the agency’s ability to raise revenues.

The lower rating affects $500.2 million of outstanding COPs.

Fitch also affirmed its A rating on $25.1 million of special obligation refunding bonds, and assigned an implied AA general obligation bond rating. The outlook is stable.

“The downgrade of the COPs reflects the district’s inability to implement revenue-raising measures as a result of the state’s newly implemented limitation on ad valorem collections,” said analyst Barbara Ruth Rosenberg. “Substantial declines in this revenue source have necessitated steep expenditure reductions and the planned use of reserves to achieve budgetary balance in fiscal 2012 and 2013.”

Rosenberg said the district has implemented a five-year draw-down of reserves, primarily to fund capital expenditures.

The Legislature last year passed a bill giving it authority to determine the amount of ad valorem revenues that can be collected by each of the state’s five water management districts. The law requires district budgets to be approved, or rejected, by the governor. Property taxes are the primary source of revenue for COP payments.

For fiscal 2012, the South Florida district reduced operations by $104.5 million and eliminated more than 280 jobs.

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