December 8, 2021
Moody's upgrades Florida's GO to Aaa, leases to Aa1/Aa2 and lottery to Aa3; outlook stable

Press Release

Moody's upgrades Florida's GO to Aaa, leases to Aa1/Aa2 and lottery to Aa3; outlook stable

| 6/22/2018

New York -- Moody's Investors Service has upgraded Florida's general obligation (GO) rating to Aaa from Aa1. We have also upgraded the Department of Management Services facilities pool revenue bonds and certificates of participation to Aa1 from Aa2, and the Department of Children and Families certificates of participation to Aa2 from Aa3, which are all notched off the state's GO rating. The rating on the State Board of Education's Lottery Revenue bonds has been upgraded to Aa3 from A1. The long-term and short-term ratings on the state's various other special tax bonds, as listed below, have been affirmed. The outlook is stable.

Please click on this link for the list of affected credit actions. This list is an integral part of this Press Release and identifies each affected issuer.

RATINGS RATIONALE

The GO upgrade reflects a sustained trend of improvement in Florida's economy and finances, low state debt and pension ratios, and reduced near-term liability risks via the state-run insurance companies. Florida's economy is performing strongly in terms of job growth, and long-term growth prospects are favorable despite the challenges posed by an aging population base. State finances are characterized by healthy reserves and historically strong governance practices and policies that are expected to continue. The state has also maintained consistently low debt and pension liabilities that compare well with other Aaa rated states.

Florida's exposure to storm-related costs and other climate risks is high, but the state's economy and finances have proven to be highly resilient to storm events and also position it well for the challenge of adapting to longer-term climate trends. In addition, over the past decade the state-run property insurance company has reduced their insurance-in-force exposure by two-thirds while both the property and reinsurance entities have increased their claims-paying resources. These entities still represent a risk of unanticipated state-related bond issuance that is unique among Aaa rated states, however.

The state's lease-appropriation credits have been upgraded to maintain their relationship to the GO rating. The facilities pool revenue bonds and Department of Management Services certificates of participation are notched once off of the GO rating, reflecting the subject to appropriation nature of the lease payments, essentiality of projects financed and moderate legal structure. The Department of Children and Families COPs are notched twice off the GO rating, reflecting a weaker legal structure and private operator risk associated with the leased asset, a facility for sexually violent offenders.

The State Board of Education Lottery Revenue bonds were upgraded to Aa3 from A1, reflecting strong growth in pledged revenues since 2012, healthy debt service coverage and a limit on additional bonding requiring at least 3 times' coverage. The affirmation of the state's other long-term special tax ratings reflects the fundamentals of each separate revenue stream, nature of the pledge, coverage and legal structure. These ratings include Department of Environmental Protection Everglades Restoration Revenue Bonds and Florida Forever Revenue Bonds, City of Tampa Capital Improvement Cigarette Tax Allocation Bonds, Seaport Investment Program Revenue Bonds, Tampa Sports Authority Taxable Florida State Sales Tax Payments Revenue Bonds, West Villages Improvement District Taxable Florida State Sales Tax Payments Revenue Bonds, Florida Inland Protection Trust Bonds and Florida Ports Financing Commission Bonds. The affirmation of the short-term VMIG 1 rating on the Department of Environmental Protection Everglades Restoration Bonds Series 2007A and 2007B reflects strong liquidity coverage provided by the Department of Financial Services, Division of Treasury.

RATING OUTLOOK

Florida's stable outlook for the GO and GO-related ratings reflects our expectation that sound fiscal management practices will continue through future economic cycles and administrations, including the state's continued willingness to raise revenues and cut spending to address budget imbalances and maintain strong reserve levels, offsetting an economically-sensitive revenue structure reliant mainly on sales taxes.

The stable outlooks on the special tax ratings reflect our expectation that revenue trends will remain favorable either through natural revenue growth or the maintenance of statutory allocations, providing sufficient coverage for all outstanding debt.

FACTORS THAT COULD LEAD TO AN UPGRADE - GO Rating

- Not applicable

FACTORS THAT COULD LEAD TO A DOWNGRADE - GO Rating

- Deterioration in the state's economic condition outside of regular economic cycles

- Divergence from strong financial and operational practices across general state operations and the state run insurance companies

- Material increase in debt and pension obligations relative to operating revenues

FACTORS THAT COULD LEAD TO AN UPGRADE - GO-Related Ratings

- Not applicable

FACTORS THAT COULD LEAD TO A DOWNGRADE - GO-Related Ratings

- Downgrade of the state's general obligation rating

- Lack of appropriation for lease payments

FACTORS THAT COULD LEAD TO AN UPGRADE - Special Tax Ratings

- Growth in, or diversification of, pledged revenue streams

- Higher leverage constraints

FACTORS THAT COULD LEAD TO A DOWNGRADE - Special Tax Ratings

- Substantial revenue decline and/or debt service coverage

- Failure of the state to adopt an annual budget

LEGAL SECURITIES

Florida's general obligation bonds benefit from the state's full faith and credit pledge. Separate issuances are expected to be paid from specific revenue sources, including gross receipts taxes on certain utilities, motor fuel taxes and motor vehicle license fees. The state's facilities pool bonds and certificates of participation are paid from lease rental payments that are subject to annual appropriation. The state's special tax bonds are secured by sales taxes, motor fuel taxes, motor vehicle title and license fees, cigarette taxes, lottery revenues and documentary stamp taxes. The 2007AB Everglades Restoration Bonds benefit from SBPA from the state's treasury department.

USE OF PROCEEDS

Not applicable

PROFILE

Florida ranks as the third largest state by population with 21 million estimated residents as of 2017. The state's 2017 Gross Domestic Product reached approximately $967.3 billion or fourth highest amongst states behind California, Texas and New York. The state's a per capita income level was 93% of the national rate in 2017.

METHODOLOGY

The principal methodology used in the general obligation ratings was US States and Territories published in April 2018. The principal methodology used in their lease ratings was Lease, Appropriation, Moral Obligation and Comparable Debt of US State and Local Governments published in July 2016. The principal methodology used in the special tax ratings was US Public Finance Special Tax Methodology published in July 2017. The principal methodology used in the self-liquidity rating was Municipal Bonds and Commercial Paper Supported by a Borrower's Self-Liquidity published in March 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Tags: Banking & Finance

 

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