TEXT-Fitch affirms South Carolina Heritage Trust revs at 'A+'

Fri Feb 8, 2013 1:25pm EST

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Feb 8 - Fitch Ratings takes the following action on Trustees of the South
Carolina Heritage Trust revenue bonds:

--$14.84 million outstanding revenue bonds, series 2006 affirmed at 'A+'.

The Rating Outlook is Stable.

SECURITY

The bonds are payable from a portion of the South Carolina state deed recording
fee dedicated to the Heritage Land Trust Fund ($0.10 of total $1.30).

KEY RATING DRIVERS

NARROW AND VOLATILE PLEDGED REVENUE: The pledged state deed recording fee
revenue stream is narrow and volatile, dependent on the value and volume of real
property transfers in the state.

ADEQUATE DEBT SERVICE COVERAGE: Adequate debt service coverage is provided by
pledged fee revenues, which have exhibited recent growth after steep declines
during the recession.

STATE COVENANT FOR SUFFICIENT RATE SETTING: The state covenants to impose and
maintain the fee at a rate sufficient to discharge all covenants, agreements,
and obligations with respect to the bonds.

ADVANCE FUNDING OF DEBT SERVICE: Debt service is funded almost a year in advance
and there are no plans or authorization for additional borrowing under this
security.

CREDIT PROFILE

The bonds were issued in 2006 by the Board of the South Carolina Department of
Natural Resources (DNR), acting as the trustees of the South Carolina Heritage
Trust, to fund part of the cost of acquiring certain high-priority property that
qualified for the state's Heritage Trust land conservation program. The bonds
are secured by the portion of the state deed recording fee dedicated to the
Heritage Land Trust Fund. Pursuant to the authorizing legislation, the trustees'
ability to issue bonds expired in March 2008 and Fitch does not expect
additional bonds to be issued backed by this security. The additional bonds test
requires that fee revenues during the most recent fiscal year are not less than
150% of maximum annual debt service (MADS).

The state deed recording fee is imposed on all transfers of real property for
which a deed is recorded with a county clerk of court or register of deeds in
each of the state's 46 counties, subject to certain exemptions. The fee is $1.30
for each $500 or fractional part of $500 of the value of real property
transferred, and 10 cents of the total fee is dedicated to the trust fund and
pledged to the bonds. The narrow pledged fee revenue stream, which is dependent
on the value and volume of real property transfers in the state, is variable -
collections increased 112% from fiscal 2002 to fiscal 2006 then declined 90%
between fiscal years 2006 through 2011, reflecting a downturn in the state's
real estate market.

The long-term declining trend in receipts reversed in fiscal 2012 growing 3.9%
from fiscal 2011, and improvement has been seen through the first six months of
fiscal 2013; up 26.2% year over year. The state had forecast a 4.8% decline in
the pledged revenue but continued improvement in the real estate market appears
to be allowing the state to surpass its forecast. Fiscal 2012 revenues provided
1.7 times (x) coverage of required and MADS requirements and, should collections
continue at the same pace for the remainder of the 2013 fiscal year, MADS
coverage will approximate 2.1x; up from 1.6x based on the state's budget
forecast.

The volatility in the revenue stream is somewhat mitigated by timing mechanisms
that result in funding of principal payments almost one year in advance. In
addition, the role for the state of South Carolina created by the authorizing
legislation strengthens the credit. The trustees are required to confirm to the
state budget and control board (governor, treasurer, comptroller general,
chairman of the senate finance committee, and chairman of the House Ways and
Means committee) not later than Dec. 1 of each year that, based on the revenues
for the previous fiscal year, fee revenues are projected to be sufficient to
cover debt service in the following calendar year. If fee revenues are projected
to be insufficient, the trustees must make recommendations as to action
necessary by the state to ensure revenue sufficiency. In the authorizing
legislation the state covenanted to impose and maintain the fee at a rate
sufficient to discharge all covenants, agreements, and obligations with respect
to bonds. The final maturity of the 2006 bonds is Aug. 1, 2021.

Significant additional revenues could be tapped in the event fee revenues are
insufficient, although they are not required to be used for debt service. Other
available funds include Heritage Land Trust Fund moneys (currently $4.7
million), annual state appropriations to the DNR ($18.6 million in fiscal 2013),
and certain other departmental discretionary funds, federal funds, and fee
revenues.


Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
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