Fitch Rates Jacksonville, Florida's $155MM Transportation Revs 2008A 'AA/F1+'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA' long-term rating and a 'F1+' short-term rating to the $154,535,000 City of Jacksonville, FL, transportation revenue bonds, series 2008A. The short-term 'F1+' rating is based upon the liquidity support of the standby bond purchase agreement (SBPA) provided by JPMorgan Chase Bank, N.A. (rated 'AA-/F1+' by Fitch).

The proceeds of the bonds will be used to refund the city's transportation revenue bonds, series 2003A, currently outstanding in the aggregate principal amount of $76,825,000; refund the city's transportation revenue bonds, series 2003B, currently outstanding in the aggregate principal amount of $76,800,000; and to pay the costs associated with the issuance of the series 2008A bonds.

The SBPA provides for the payment of the principal component of purchase price and up to 36 days of interest calculated at a maximum rate of 12% per annum based on a year of 365 days. The SBPA will expire on April 24, 2009, unless extended or earlier terminated pursuant to its terms. The remarketing agent for the bonds is Morgan Stanley. The series 2008A bonds are expected to be delivered on or about April 25, 2008.

The bonds initially bear interest in the weekly rate mode, but may be converted to bear interest at a daily, bond interest term, or long-term mode. While the bonds bear interest at the weekly rate mode, interest is payable on the first business day of each month, commencing on May 1, 2008. Holders of bonds bearing interest at a daily or weekly rate mode may tender their bonds for purchase with prior notice. The SBPA covers the bonds while they are in the weekly rate mode.

The bonds are subject to a mandatory tender upon conversion of the interest rate modes, upon the expiration or substitution of the SBPA, and upon the occurrence of certain events of default under the SBPA. The bonds are also subject to optional and mandatory redemption.

The 'AA' rating on Jacksonville's transportation revenue bonds reflects solid coverage of debt service from pledged revenues, historical stability of the pledged revenue stream despite some recent weakening, sound legal provisions and the general credit characteristics of the city. The last include a diverse, stable economy and historically satisfactory fiscal position. Credit concerns pertain to the overall rising debt levels driven by the Better Jacksonville Plan (BJP), along with a sizable police and fire unfunded pension fund liability, and limited, but improving, financial flexibility. However, Fitch believes that management's introduction of several new fiscal policies and controls help mitigate these concerns.

The transportation revenue bonds are secured by the city's half-cent local option transportation sales tax and constitutional fuel tax revenue on a subordinate basis to bonds issued by the State of Florida for the benefit of the Jacksonville Transportation Authority (JTA). The JTA has pledged under an interlocal agreement with the city not to incur additional debt senior to or on parity with the bonds now offered. In fiscal 2000, the city authorized $750 million in transportation projects over a 10-year period as part of the $2.25 billion BJP, a comprehensive capital program that will fund various infrastructure and economic development improvements.

The half-cent transportation sales tax, the larger source of security for the bonds, grew at an average annual rate of 4.0% between fiscal years 2000 and 2007. Revenues are up 1.9% for the first four months of fiscal 2008 relative to the same period in 2007. Constitutional fuel tax revenues grew at an average annual rate of 2.9% between fiscal years 2000 and 2007, and are down 4.1% for the first four months of fiscal year 2007 relative to the same period in 2006. Including this issue, coverage of maximum annual debt service on outstanding transportation revenue bonds and senior lien state bonds was 1.6 times (x) by fiscal 2007 pledged revenue.

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