Fitch Rates Florida Community College $28.2MM Cap Improvement Rev Bonds 'A+'; Outlook Stable
NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'A+' rating to the approximately
$28,200,000 State of Florida Department of Education community college
capital improvement revenue bonds, series 2008A. The bonds are
scheduled to sell competitively during the month of July or August. At
the same time, Fitch affirms the 'A+' rating on approximately
$51,470,000 of outstanding capital improvement revenue bonds. Six of
Florida's 28 community colleges currently issue capital improvement
revenue bonds, which are secured by a mandatory capital improvement
fee (CIF) assessed to most full-time equivalent students attending
these institutions. The six community colleges are Broward College;
Palm Beach Community College; St. Petersburg College; Santa Fe
College; Seminole Community College; and Tallahassee Community College
(the participating colleges). The CIF revenue pledge is a joint
obligation of the participating colleges. The Rating Outlook is
Stable.
The 'A+' rating is supported by strong legal provisions which
provide bondholders with a first lien on the participating colleges'
CIF revenues; the essentiality that community colleges provide to
Florida's higher education network; strong oversight from the state of
Florida (general obligation bonds rated 'AA+' by Fitch); solid student
demand; and low debt burden. Credit concerns include the participating
colleges' track record of weak operating performance; limited
liquidity; and limited revenue diversity resulting in heavy reliance
on state funding.
The CIF increased to $5.00 per credit hour in fiscal 2007 from
$3.00 in fiscal 2006. In fiscal 2008 it was increased at five of the
six participating colleges, and ranges between $5.25 and $5.70. The
fee is authorized by state statute. The fee is limited to 10% of
tuition and the annual increase may not exceed $2.00 per credit hour.
For fiscal 2008, tuition at the participating colleges ranged from
$53.80 to $59.05 per credit hour. With the average tuition at the
participating colleges at $56.55 per credit hour and the average CIF
at $5.48 per credit hour, a student taking 30 credit hours per year
would pay approximately $1,861. For fiscal 2007, the total CIF
collected at the participating colleges was $12.5 million. CIF
collection for fiscal 2008 is expected to increase to $13.7 million
due to enrollment growth and the CIF increase per credit hour.
While student demand at the participating colleges is strong, most
financial indicators are below those typically generated by community
colleges at the 'A+' level. Each of the participating colleges
generally operates below the breakeven level, with the operating
margins for fiscal 2007 ranging from a high of negative 0.8% to a low
of negative 8.6%. Additionally, the colleges have limited liquidity to
absorb any significant reduction in state funding; state funding for
operations currently comprises approximately 50% of each participating
colleges' total operating revenues. Fitch notes that the
aforementioned concerns are partially mitigated by the integral role
played by the participating community colleges in the state's public
higher education sector and the strong oversight provided by the
state, including the state Department of Education.
Bond proceeds will be used to finance the construction of a
parking garage on the campus of Broward College ($19.2 million) and a
new vocational center on the campus of Palm Beach Community College
($9 million). Proceeds will also be used to purchase a bond insurance
policy; fund a debt service reserve account; and to pay various costs
of issuance. Maximum annual debt service (MADS) on capital improvement
revenue bonds is level through 2028 at approximately $6.4 million.
Based on the participating colleges' fiscal 2007 CIF collection ($12.2
million), MADS coverage was satisfactory at 1.9 times (x). For fiscal
2008, MADS coverage is estimated to be 2.2x, based on the expected CIF
collection of $13.7 million. The participating colleges' pro forma
debt burden is low due to significant support received from the state
for capital improvements.
Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, 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 Ratings, New York
Colin Walsh, 212-908-0767
Douglas J. Kilcommons, 212-908-0740
or
Media Relations:
Sandro Scenga, 212-908-0278
Copyright Business Wire 2008
