• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Fitch Rates Okaloosa County, Florida's $63.5MM Water & Sewer Revs 'A+'

Posted on: Friday, 20 October 2006, 18:01 CDT

Fitch Ratings assigns an underlying 'A+' rating to Okaloosa County, Florida's (the county) $63.5 million water and sewer revenue bonds, series 2006. The bonds, expected to be insured, are scheduled to sell via negotiation led by Crews and Associates, Inc. the week of Nov. 14. First Southwest Company serves as the county's financial advisor. Proceeds will be used to refund the county's outstanding water and sewer revenue bonds, series 1992 and finance the construction of a replacement wastewater treatment plant. Fitch also affirms the 'A+' rating on approximately $25.8 million in outstanding parity water and sewer revenue bonds. The Rating Outlook is Stable.

The 'A+' rating reflects the water and sewer system's (the system) historically strong debt service coverage, adopted multiyear rate increases and moderate capital needs, in addition to the system's overall rates, which are high relative to area service providers. Also reflected in the rating is the county's stable economy anchored by the presence of Eglin Air Force Base (Eglin AFB) and consistently low unemployment rates.

Okaloosa County is located on the Gulf Coast of Florida's panhandle and is bordered by Alabama to the north. The area economy is stable, anchored by Eglin AFB, which employs approximately 22,000 military and civilian personnel, and bolstered by tourist destinations such as the City of Destin, Fort Walton Beach and Okaloosa Island. The county's other largest employers include health care providers and a significant number of military technical support suppliers. Wealth levels are average and per capita retail sales register well above the state and U.S. averages. The county's unemployment rate declined to a very low 2.6% through August 2006.

The system is operated as a combined enterprise fund of the county. Eglin AFB, which occupies almost half of the county's land mass, does not currently require water or sewer service from the county. The system is divided into four noncontiguous service areas that supply the unincorporated sections of the county that lie to the north of the Eglin AFB and to the south along the coast. Proceeds from the current offering will finance the construction of a replacement wastewater treatment that will serve the southern portion of the county. The existing water supply is derived from 21 Floridan Aquifer wells providing sufficient capacity through 2017. The system independently owns and operates three wastewater treatment plants and jointly owns a fourth treatment facility with the cities of Niceville and Valparaiso.

Financial operations are sound, shown by ample cash reserves and solid debt service coverage. The system's liquidity position is strong, as evidenced by a high 459 days cash-on-hand as of fiscal 2005. Net revenues, together with impact fees, covered annual debt service by a solid 2.7 times (x) in fiscal 2005. Projected coverage levels that include the current offering, a planned debt issuance of approximately $16 million in fiscal 2008 and adopted annual rate increases of 3.05% through fiscal 2008 are expected to decline to an adequate 1.3x. Combined water and sewer rates are high compared to other area systems.

Outstanding debt includes water and sewer revenue bonds, series 2004, totaling approximately $25.8 million and secured by a senior lien on the system's net revenues. The system's 2006-2011 capital improvement plan (CIP) totals $100 million. Approximately $66 million will be used to construct a new wastewater treatment facility early in fiscal 2007, which will provide additional capacity through 2026. The proposed facility will be constructed on land owned by Eglin AFB and leased to the county according to a recently (fiscal 2006) adopted 30-year lease. Approximately 80% of the CIP will be funded through debt financing, and the remaining portion will be supported through system revenues.

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.

Source: Business Wire

More News in this Category