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TEXT - Fitch affirms Florida's Northern Palm Beach Cty Improvement District
January 16, 2013 / 9:01 PM / 5 years ago

TEXT - Fitch affirms Florida's Northern Palm Beach Cty Improvement District

Jan 16 - Fitch Ratings affirms the outstanding ratings on the following
Northern Palm Beach County Improvement District, FL's (the district) water
control and improvement bonds:

--$34.5 million Unit of Development 9A (Abacoa Project) water control & 
improvement refunding bonds series 2003 at 'BBB+'.

The Rating Outlook is Stable.

SECURITY 

The water control and improvement bonds are separately secured by special 
assessments (a drainage tax) levied by the district against all taxable property
within the respective development units. The bonds do not constitute a general 
obligation of the district. The debt service reserve fund is satisfied by an 
MBIA surety.

KEY RATING DRIVERS

SOUND LEGAL STRUCTURE AND PROCESS: Drainage taxes are levied against improved 
properties and constitute a first lien on the property, which is on parity with 
real estate taxes and superior to other liens including mortgages. The statutory
tax collection process is timely and rigorous.

MINIMAL CUSHION: Drainage taxes are levied in an amount not to exceed 100% of 
the assessed benefits for purposes of paying the bonds. However, the principal 
amount of bonds to be issued may not exceed 90% of the assessed benefits 
resulting in a low 10% cushion to accommodate delinquencies.

ELEVATED TAXPAYER CONCENTRATION: Abacoa continues to exhibit heightened leading 
taxpayer concentration, with the top 10 representing approximately 30% of the 
total assessments in fiscal 2011. 

HIGH DEBT LEVELS: Outstanding debt levels of Unit 9A when coupled with 
coterminous Unit 9B (not rated by Fitch) remain elevated, but all capital 
projects are complete and no additional issuance is expected.

ROBUST LAND TO LIEN RATIO: The value of land to direct and overlapping debt is 
high at approximately 14 times, which tempers risk to the district's debt burden
and supports Fitch's expectation for continued strong tax collections. 

STRONG ECONOMIC PROFILE: Jupiter's economy continues to expand, and economic 
indicators remain positive relative to state and national averages.

CREDIT PROFILE

Northern Palm Beach County Improvement District is an independent special 
district of the State of Florida created to provide water management and 
infrastructure development services to properties in northern Palm Beach County 
(GO bonds rated 'AAA' with a Stable Outlook by Fitch).

EXPERIENCED, SUCCESSFUL DISTRICT 

The district has extensive experience in the management of infrastructure 
construction projects, having created 66 units of development since its 
inception in 1959. The Abacoa unit of development is a mixed-use community 
located in the Town of Jupiter ('AAA' with a Stable Outlook). Officials report 
approximately 4,500 built and occupied homes in Abacoa, which is approved for 
nearly 6,100 residential dwelling units. 

SPECIAL ASSESSMENTS ON PARITY WITH PROPERTY TAXES

The district may levy a drainage tax on all non-exempt property within each unit
of development in an amount not to exceed 100% of the benefits assessed thereto 
for the purpose of paying the principal of bonds. There is no limit on the 
amount of drainage tax for the purpose of paying interest on bonds. The district
engineer determines the assessment of benefits prior to the construction of the 
improvement plan. 

The district levies the drainage tax based on land classification and acreage. 
As these assessments are not ad valorem taxes, they do not depend on the 
assessed value of the property. The drainage tax is included on landowners' 
property tax bills issued by the county tax collector, and taxpayers must pay 
all taxes shown in the tax notice without preference in payment. Drainage taxes 
constitute a first lien on the property against which they are assessed, carry 
equivalent weights as liens for state and county taxes, and are superior to all 
other liens including mortgages.

RIGOROUS TAX SALE PROCESS

The principal amount of bonds issued for each unit of development may not exceed
90% of the assessment of benefit, providing a 10% cushion to accommodate 
delinquencies. A timely and rigorous tax collection process provides further 
assurance to bondholders. Drainage taxes due on Nov. 1 of any given year are 
levied to pay debt service on bonds coming due the following Aug. 1 and Feb. 1 
of the second following year. Tax payments become delinquent on April 1. If 
delinquent beyond 60 days, they become subject to a tax lien sale by the county 
tax collector. 

Proceeds from the tax lien sale must be used to pay delinquent taxes, including 
delinquent drainage taxes. According to the district, current tax collections 
continue to average approximately 99%, with total collections, including 
penalties and interest, typically exceeding 100%. Fitch notes the district is 
empowered to levy a maintenance assessment unlimited in amount, which is legally
available for debt service but not pledged to bondholders.

SIGNIFICANT TAXPAYER CONCENTRATION

Fitch views as a credit negative the high degree of taxpayer concentration 
within Abacoa. Land ownership by a number of real estate developers accounts for
a substantial portion of the tax base, with the top 10 representing 
approximately 30% of the total drainage tax levy. The largest taxpayer is 
Divosta Homes LP, at approximately 9%, a wholly-owned subsidiary of the Pulte 
Group (rated 'BB' with a Stable Outlook as of August 2012) and the original 
landowner and developer of Abacoa. 

Fitch notes that top 10 taxpayer concentration levels favorably declined, from 
72% in 2002 to 41% in 2008 but decelerated over the next four years to 30% in 
2012. While a slowdown in activity is consistent with housing market pressures, 
Fitch expects demand to pick up over the near term as housing continues to 
recover. Property values remain high relative to the rate of the drainage 
assessment and debt outstanding in Abacoa, which partially mitigates 
concentration risk. The drainage taxes assessed within each unit of development 
are considered comparable to similar units of development located in northern 
Palm Beach County. 

ELEVATED DEBT BURDEN

Overall debt represents 7.5% of market value and $6,865 on a per capita basis, 
which are levels that Fitch considers high. Debt service is level through final 
maturity and the bonds pay interest at a fixed rate. The improvement plans has 
been completed. Capital needs are minimal and will be funded from the levy of 
the maintenance assessment. No additional debt is anticipated.

BIOTECH DRIVES LOCAL ECONOMY

Jupiter, located on the eastern coast of Florida in Palm Beach County, has 
continued to expand its economy in recent years, including a notable biotech 
sector. In addition to the Scripps Research Institute, which has had a presence 
in the town since 2005 and moved into a permanent facility in the town in 2009, 
the Max Planck Institute has also recently selected Jupiter to act as the base 
of its U.S. operations. The Max Planck Institute has begun operations in the 
town and opened a permanent facility this year. Both institutes expect to 
increase employment over the next few years. 

Other recent economic developments include G4 Wackenhut's, an international 
security firm, movement of its North American headquarters to the town as well 
as growth in the industrial and aerospace engineering sectors, as the town 
benefits from its location roughly 20 miles for the Palm Beach County 
International Airport. 

Economic indicators compare favorably to those of the state and nation. The 
unemployment rate has decreased to 6.2% for October 2012 from 7.5% a year prior,
remaining below state and national averages. Wealth levels remain quite high 
with per capita money income at approximately and 150% of both state and 
national levels.

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