Fitch Rates Collier County, FL's Non Ad Valorem Rev Bonds 'AA'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AA' rating to the following Collier County, Florida's
(the county) non ad valorem revenue bonds:

--$61 million series 2010.

The bonds are expected to sell competitively on July 13th.

In addition, Fitch affirms the following ratings:

--Implied general obligation (GO) at 'AA+';

--$203.8 million in sales tax revenue bonds at 'AA-';

--$152.9 million in gas tax revenue bonds at 'AA-'.

The Rating Outlook is for the implied GO and non ad valorem bonds is Stable.

The Rating Outlook for the sales tax and gas tax revenue bonds remains Negative.

RATING RATIONALE:

For the Implied GO and Non Ad valorem Bonds:

--High area wealth levels.

--Manageable capital needs which are funded on a pay-as-you-go basis.

--Recent volatility in financial performance.

--A high degree of potential financial flexibility as the county has a number of
available revenue sources and expenditure reductions.

--The 'AA' rating for the non ad valorem revenue bonds incorporates the
security's appropriation-risk.

--Debt service coverage on the non ad valorem revenue bonds remains high despite
recent decreases in available revenue and is expected to remain so given the
county's reliance on excess revenues to fund general government operations.

--The Stable Outlook for the implied GO and non ad valorem revenue bonds is
based on Fitch's expectation that the county will regain structural balance in
fiscal 2010 as currently anticipated.

For the Special Tax Bonds:

--The ratings on the sales tax and gas tax revenue bonds incorporate modest
coverage levels.

--The Negative Outlook reflects Fitch's concerns regarding potential future
volatility in pledged revenues given weakness to date and the potential impact
of the recent oil spill in the Gulf of Mexico.

KEY RATING DRIVERS

GO and Non Ad Valorem Bonds:

--Management's ability to maintain stable financial operations and insure a
consistent level of financial flexibility.

WHAT COULD TRIGGER A DOWNGRADE?:

Sales and Gas Tax Bonds:

--Further declines in pledged revenue streams and coverage levels or changes in
economic indicators that point to future potential weakness.

SECURITY:

The non ad valorem bonds are secured by the county's covenant to budget and
appropriate (CB&A), by amendment if necessary, from non ad valorem revenues
amounts sufficient to pay debt service on the series 2010 bonds.

The sales tax revenue bonds are secured by a first lien on the county's share of
the local government 1/2 cent sales tax.

The gas tax revenue bonds are secured by a first lien on a basket of gas tax
revenues including the 7 cent gas tax, 9 cent gas tax, the 5 cent local option
gas tax, the 6 cents local option gas tax, and the constitutional gas tax.

CREDIT SUMMARY:

The CB&A bonds have no direct lien on any specific revenue stream while the
sales tax bonds have a first lien on the county's 1/2 cent sales tax, which
accounted for over 30% of total non ad valorem revenues in fiscal 2009.
Available non ad valorem revenues, excluding maximum annual debt service (MADS)
for the sales tax bonds, provided 15.1 times (x) MADS coverage for fiscal 2009.
Revenues are expected to decrease over 20% for fiscal 2010, due mainly to
weakness in economically sensitive revenue, although coverage is projected to
remain over 10.7x. Coverage is expected to stay high as excess revenues are
needed to fund general government operations.

The 1/2 cent sales tax is levied by the state with revenue distributed to each
county and its respective incorporated municipalities based on a population
driven formula. Pledged revenues have declined in each of the three past audited
years to cover current MADS 1.37x in fiscal 2009. Fiscal 2010 year to date
revenues through the first seven months show revenues up 0.2% from a year prior
with year over year increases in three out of the last four months.

Gas tax revenues have decreased moderately for the past four audited fiscal
years resulting in 1.27x MADS coverage for fiscal 2009. Year to date revenues
for the first seven months of fiscal 2010 show revenues are down 0.3% from a
year prior.

Collier County, which includes the city of Naples (rated 'AAA' by Fitch) is
located in southwestern Florida, encompassing part of the Everglades National
Park. Historically concentrated in tourism and agriculture, the economy has
diversified over the past decade to include a sizeable presence from health care
and scientific research. Unemployment has increased with the recent softening in
the economy to 12.3% in March 2010 from 9.2% a year prior. Wealth levels remain
amongst the highest in the state and nation. The tax base has declined in recent
years due to a combination of recent state property tax reform and the housing
market correction including an 11% decline in fiscal 2010 and an expected 12.1%
decrease in fiscal 2011. The operating tax rate remains low at 3.56 mills for
despite being increased in fiscal 2010 to offset the decline in the tax rate. No
tax rate increase is currently planned for fiscal 2011.

Financial results have exhibited some volatility in recent years with operating
deficits in each of the last two audited years. Following a policy decision in
fiscal 2008 to draw down reserves to more closely mirror its fund balance target
cap of 15%, the county experienced an additional decrease of $20.7 million in
reserves in fiscal 2009, lowering the unreserved fund balance to 11.5% of
spending. The county attributes the decrease in fiscal 2009 to a combination of
sales tax and interest earnings coming in below budget. The drawdown was
unanticipated by Fitch at the time of the last rating, which is concerning to
Fitch given that management reports that it monitors revenue sources regularly.
Fiscal 2010 is expected to end roughly flat due primarily to reductions in
pay-as-you-go capital funding. Results significantly weaker than anticipated as
was the case in fiscal 2009 would put downward pressure on the county's rating.

Overall debt is moderate and is expected to remain so over the next few years as
the county's capital needs are reduced due to the economic downturn,
concentrated on maintenance, and largely funded on a pay-as-you-go basis. The
fiscal 2010-2014 capital improvement plan (CIP) totals $1.5 billion, including
$585 million for a combination of reserves, debt service payments and operating
expensed. No additional tax-supported debt is planned. The county also recorded
over $110 million in unreserved fund balance in its capital projects and road
construction funds at the end of fiscal 2009.

Applicable criteria available on Fitch's website at www.fitchratings.com:

--'Tax-Supported Rating Criteria,' dated Dec. 21, 2009.

--'U.S. Local Government Tax-Supported Rating Criteria', dated Dec. 21, 2009.

Additional information is available at www.fitchratings.com.

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Fitch Ratings, New York
Rachel Barkley, +1-212-908-0514
Michael Rinaldi, +1-212-908-0833
or
Media Relations
Cindy Stoller, New York, +1-212-908-0526
cindy.stoller@fitchratings.com

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