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Fitch Affirms Monroe County FL School District's Sales Tax Revs at 'A+'; Outlook StableNEW YORK --(Business Wire)-- Fitch Ratings has affirmed its rating on the following Monroe County School District, FL (the district) sales tax revenue bonds: --$8.5 million outstanding sales tax revenue bonds, series 2005 at 'A+'. The Rating Outlook is Stable. SECURITY The bonds are backed by the district's portion of the one-half cent discretionary local infrastructure sales tax. The tax is authorized through Dec. 31, 2015, three months after the final maturity of the series 2005 bonds. The debt service reserve requirement is fulfilled by a surety from Ambac (not rated by Fitch). KEY RATING DRIVERS GROWING SALES TAX REVENUES: The district has experienced an upward trend in sales tax revenues the last four years enhancing debt service coverage on the outstanding series 2005 bonds. IMPROVED FINANCIAL PROFILE: Management's conservative budgeting practices have resulted in improved financial performance and growth in reserve levels. Projected results for fiscal 2014 are also positive and show additional growth in reserves and continued strong overall financial condition. LIMITED ECONOMIC PROFILE: The economy remains heavily concentrated in tourism; nevertheless, economic indicators remain favorable compared to the state and nation. LOW DEBT LEVELS: Overall debt ratios are very low and Fitch does not expect these to change materially. Total carrying costs for debt, pensions and other post-employment benefits (OPEB) are low as a percentage of total governmental fund spending. RATING SENSITIVITIES SALES TAX COVERAGE: The sales tax rating is sensitive to changes in debt service coverage from revenues. CREDIT PROFILE Comprised primarily of the Florida Keys, Monroe County is the southernmost county in the U.S. The school district boundaries are coterminous with the county. The 2013 population of 74,809 is up 3.5% since 2008. SALES TAX REVENUES SEE GROWTH Sales tax revenues received in fiscal 2014 provided a solid 1.73x coverage on senior lien debt service. This is up from fiscal 2013 and 2012 coverage of 1.60x and 1.53x, respectively. The series 2005 bonds, representing all senior lien debt, mature Oct. 1, 2015, three months prior to the sunset of the voted sales tax. All-in debt service coverage including subordinate debt was 1.44x. The subordinate bonds mature Oct. 1, 2015 as well. Coverage next year should remain at or better than fiscal 2014 levels as sales tax growth has continued in the first three months of this fiscal year. LIMITED ECONOMY DRIVEN BY TOURISM Tourism drives the local economy as reflected in the high proportion of the county's top employers and taxpayers in the hospitality sector. Though the tourism industry softened during the national recession, it has shown signs of growth in the last few years, not only in the county, but statewide. SOCIO ECONOMIC INDICATORS ARE STRONG Unemployment rates are moderate at 3.9% compared to the state (6.7%) and national (6.3%) levels for August. Both jobs and labor force have improved annually since 2009. Wealth levels exceed state averages with per capita income and median household income at 130% and 113%, respectively, of state levels. The county has started to see a rebound in taxable values after a significant decline during the recession. The district's market value improved 3.7% to $29.4 billion for fiscal 2015 following a 7.6% increase in fiscal 2014. Housing prices improved by 12.5% year over year through September according to Zillow.com. CONSERVATIVE BUDGET PRACTICES HELP RESTORE FUND BALANCE The district experienced positive operating results in fiscal 2013 as the general fund recorded a surplus after transfers of $4.4 million (5.8% of spending). Variances in both revenues and expenditures were positive as property taxes exceeded expectations and expenditures were lower, in part due to delays in filling open positions, a continuance f employee furlough days, and general monitoring of departmental spending. Unrestricted fund balance improved to $9.1 million or a sound 11.9% of spending, up from 5.8% in fiscal 2012. Fund balance levels had declined to as low as 3.9% in fiscal 2010 after state funding levels were reduced and the district resorted to the use of fund balance to support operations. Measures to cut spending were taken helping restore budgetary balance in fiscal 2011 and budget practices have become more conservative. FISCAL 2014 PROJECTIONS ARE POSITIVE Fiscal 2014 unaudited results reflect surplus operations with a projected $2.6 million increase in fund balance. Conservative estimates on expenditure savings helped the district achieve these surplus results as employee and general operating costs came in lower than budgeted. Unrestricted fund balance is projected to improve to $12.3 million or a solid 14.8% of expenditures. FISCAL 2015 BUDGET REMAINS CONSERVATIVE The district's fiscal 2015 general fund budget of $91 million is up $2.2 million compared to the prior year's budget. Cost for salaries and employee benefits are the primary drivers and represents 72% of expenses. On the revenue side state aid was up 11.5% compared to unaudited fiscal 2014 actuals as enrollment has trended up slightly. The tax millage decreased slightly by 0.055 mills to 3.626 mills, well below the state's 10 mill statutory cap. No appropriation of fund balance was made in fiscal 2015, similar to fiscal 2014. The budget includes revenues from the district's voted additional half mill operating levy. This levy provides for approximately $10.5 million in revenues (assuming a 96% collection rate) and expires in fiscal 2016. The School Board approved a general fund balance policy this past September that requires maintenance of combined assigned and unassigned fund balances at the greater of 15% of revenues or the average fund balance percentage for the top quartile of school districts in Florida. Fitch expects reserve levels to remain within policy levels due to management's conservative budget practices. SALES TAX REFERENDUM PLANNED FOR NOVEMBER 2015 Management has approved a half cent sales tax referendum for this coming November seeking extension of the expiring current infrastructure sales tax. The estimated annual proceeds from the sales tax is $15 million which would be dedicated to capital improvements. The term of the sales tax would be for 10 years. If approval is not successful, management has indicated that planned improvements could be delayed or eliminated from the capital plan. The district's outstanding certificates of participation (COPs) are currently being funding from the capital outlay millage which is currently only levied at 0.50 mills, well below the available 1.50 mills per statute. Notably, the district's COPs debt service in fiscal 2014 only required 0.23 mills with the remainder used for capital and maintenance needs. An increase in the capital millage, if pursued, is subject to the school board's approval. DEBT LEVELS ARE LOW AND RETIREE COSTS ARE MANAGEABLE The district's overall debt levels are very low at 0.4% of the district's market value and $1,411 per capita. Amortization is above average, with roughly 58% of debt being retired in 10 years. No new debt is planned at this time. Employees of the district participate in the state administered Florida Retirement System (FRS). FRS is relatively well funded with an estimated funding ratio of 79% as of June 30, 2013 utilizing Fitch's 7% discount rate. The district provides an implicit subsidy for its retirees for health and life insurance benefits. The unfunded liability was a manageable $8.5 million as of July 1, 2012. Pension and OPEB obligations remain well-managed. Carrying costs for annual debt, pension and OPEB pay-go are manageable at 9.7% of total fiscal 2013 governmental expenditures. Additional information is available at 'www.fitchratings.com'. In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS (News - Alert) Global Insight, National Association of Realtors, and Zillow, Inc. Applicable Criteria and Related Research: --'Tax-Supported Rating Criteria' (Aug. 14, 2012); --'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012). Applicable Criteria and Related Research: Tax-Supported Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015 U.S. Local Government Tax-Supported Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=912334 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. |
