Feb 19 - Fitch Ratings has affirmed its rating on the following School
District of Hillsborough County, Florida (the district) revenue bonds:
--$208 million outstanding sales tax revenue bonds at 'BBB+'.
The Rating Outlook is Stable.
The sales tax revenue bonds are secured by a one-half cent local infrastructure
sales tax or community investment tax (CIT), levied and collected by
Hillsborough County (the county). The CIT was approved by voters for a 30-year
period ending Dec. 1, 2026, two months after the final maturity of the bonds.
According to an interlocal agreement between the county and the district, the
district receives 25% of the total CIT revenue.
KEY RATING DRIVERS
NARROW COVERAGE FROM SALES TAX REVENUES: Debt service coverage on maximum annual
debt service (MADS) from fiscal year revenues has improved modestly but remains
extremely narrow at only 1.15x in 2012.
DIVERSE AND STABILIZING ECONOMY: The county serves as the economic anchor of
western Florida, with significant employment in the professional and business
services and education and health services. Signs of economic stabilization are
evident subsequent to the broad retracting of employment metrics as a result of
the recent recession.
RESIDUAL REVENUES MAINTAINED BY DISTRICT: The district continues to maintain a
significant amount of unpledged residual sales tax revenues which it has
indicated it would utilize if necessary to compensate for any deficiency in
STRONG CREDIT RATING OF THE DISTRICT: The rating on the sales tax bonds is
capped at Fitch's implied general obligation bond rating for the district, which
is currently 'AA+' with a Stable Outlook.
VOLATILITY OF PLEDGED REVENUES: The rating is sensitive to the level of debt
service coverage from pledged revenues. A change in the economic environment
could have an effect on pledged revenue activity and coverage levels.
The district is coterminous with Hillsborough County and includes the city of
NARROW SALES TAX COVERAGE
CIT sales tax revenues have begun to stabilize and return to modest growth after
exhibiting significant volatility over the past few years.
Fiscal 2012 revenues covered MADS by 1.15 times (x), versus the 1.10x of the
previous year. Fiscal 2013 monthly sales tax collections through December are 4%
higher than the same period for fiscal 2012. Fitch takes comfort that pledged
revenue has grown on a year-over-year basis for all but one month since the
beginning of fiscal 2011.
District residual revenues total $33 million, up from $25 million two years ago,
and are equal to an additional 1.58x MADS. These residual revenues are available
to use if necessary to compensate for any deficiency in the current year's
pledged revenues, although they are not pledged to bondholders.
Bond documents restrict additional debt with a 1.20x coverage test on pro forma
MADS, so no new debt is expected in the near future. The debt service reserve
account is funded by a surety bond policy from Ambac (not rated by Fitch).
BROAD EMPLOYMENT BASE RECOVERING FROM ECONOMIC DOWNTURN
Hillsborough County (Fitch implied GO 'AAA' with a Stable Outlook) is
coterminous with the district and serves as the economic center for Florida's
Gulf Coast with major sectors in business services, and health care and
education. The long-term profile of the county economy is strong and diverse.
Signs of recovery from the recent recession are evident. An uptick in employment
has driven down the October 2012 unemployment rate to 8%, a healthy improvement
from the 10.1% of the previous year. Wealth levels are around or slightly below
STRONG CREDIT RATING OF THE DISTRICT
The district's financial position is healthy, evidenced by sizable reserves and
a history of strong management practices. It ended fiscal year 2012 with
unrestricted general fund reserves of $268 million, equal to a healthy 18.6% of
spending. The district's implied GO bond rating is 'AA+' with a Stable Outlook.
COMMUNITY INVESTMENT TAX
The 30-year CIT was approved by voters in a 1996 referendum and may be used only
for infrastructure projects. All outstanding sales tax bonds mature prior to the
tax's expiration. Pursuant to an interlocal agreement, 25% of the net tax
revenue is distributed to the district and provides the security for these
bonds. The remaining 75% of sales tax revenue is distributed among the Tampa
Sports Authority, the county, and the cities of Plant City, Temple Terrace and
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.
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 Global Insight, Zillow.com, and the National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'Fitch Rates Hillsborough County Schools, FL's COPs 'AA', Outlook Stable'
(Feb. 22, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria