Sarasota County, FL's Ad Valorem Tax Bonds Upgraded To 'A-' On Tax-Base Recovery; Outlook Stable
(Editor's Note: The analysis described in this article, published March 10, 2014, reflects an error in the application of our criteria. For a corrected analysis, see our report published July 1, 2016)
NEW YORK (Standard & Poor's) March 10, 2014--Standard & Poor's Ratings Services has raised its long-term rating on Sarasota County, Fla.'s limited ad valorem tax bonds one notch to 'A-' from 'BBB+'. The outlook is stable. "The upgrade reflects our view of the recovery in the county's property tax base, which, in our view, should contribute to stronger revenue coverage," said Standard & Poor's credit analyst Lindsay Wilhelm. The rating reflects our opinion of:
- Evidence of some tax-base stabilization, with values increasing 4.1% in fiscal 2014;
- Stronger annual debt service coverage of 1.30x in fiscal 2013;
- A revised debt service schedule following a 2011 defeasance with lower payments through 2019, which we believe provides the county with greater cushion to maintain coverage as the recovery takes hold; and
- The county's demonstrated willingness to step in when coverage falls to low levels, based on the 2011 defeasance, and while not pledged as security, a statement of intent to ensure that debt service on the bonds is paid from lawfully available funds.
We believe offsetting factors include:
- The limited nature of the pledge securing the bonds;
- Adequate maximum annual debt service (MADS) coverage of 1.19x in 2014; and
- The absence of a debt service reserve.
Sarasota County originally issued the bonds to provide funds for its Environmentally Sensitive Lands Protection and Parklands program, a voter-approved and taxpayer-funded initiative designed to acquire and protect natural lands and parklands. The electorate authorized the bonds at a 1999 voter referendum and renewed the authorization for an additional 10 years in 2005. The stable outlook reflects Standard & Poor's opinion of adequate MADS coverage following Sarasota's defeasance of a portion of the limited ad valorem bonds in 2011, and evidence of taxable value growth. In addition, the county's demonstrated willingness to step in when coverage deteriorates provides further rating stability. Demonstrated and sustainable improvement in MADS coverage, led by increases in real estate prices, could lead to an upgrade in the next two years, assuming no offsetting coverage dilution. Conversely, a dilution in coverage related to a backslide in property values or additional bonding could lead to our lowering the rating. RELATED CRITERIA AND RESEARCH Related Criteria USPF Criteria: Special Tax Bonds, June 13, 2007
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
| Primary Credit Analyst: | Lindsay Wilhelm, New York (1) 212-438-2301; lindsay.wilhelm@standardandpoors.com |
| Secondary Contact: | Hilary A Sutton, New York (1) 212-438-7093; hilary.sutton@standardandpoors.com |
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