Fitch Affirms Rating on Cape Coral FL Series 2005 Spec Assessment Rfdg Bonds; Outlook Stable

NEW YORK--()--Fitch Ratings affirms and corrects the 'BBB+' rating on Cape Coral, Florida's $20.2 million outstanding wastewater & irrigation water refunding assessment bonds (Southwest 1, Pine Island Road & Southwest 3 Areas), series 2005. The bonds were inadvertently removed from Fitch's web site and were not included in a June 14, 2012 and June 28, 2011 press release affirming similar ratings. Fitch would have affirmed the bonds at 'BBB+' with a Stable Outlook. The bonds are now displayed with the correct rating history.

The Rating Outlook is Stable.

SECURITY

The assessment bonds are secured by special assessments levied and collected in the affected area, and by a covenant to pay debt service from net revenues of the water and sewer utility system after payment of senior and subordinate (state loans) obligations. The bonds are also secured by a surety-funded debt service reserve fund.

KEY RATING DRIVERS

BACK-UP PLEDGE: The key credit strength is the city's covenant to use net revenues of the city's water and sewer system (the system), on a super-subordinate basis, to make up any shortfall in debt service payments on outstanding assessment bonds. Assessments alone do not in all cases fully cover debt service.

IMPROVED UTILITY SYSTEM PERFORMANCE: The system's financial profile has strengthened in recent years due to user rate increases and an improving economy, providing adequate capacity to cover any potential debt service deficiencies on special assessment bonds. Fitch rates the system's utility bonds 'A'.

LIMITED COVERAGE: Special assessments are levied in small geographic areas and are structured to provide narrow annual debt service (ADS) coverage on outstanding bonds, leaving little margin for non-collection. Historical collections have been satisfactory in most years, although certain areas have had to utilize accumulated excess assessment revenues to meet annual debt service obligations.

TAX LIEN PROVIDES INCENTIVE: Special assessments are included as a line item on the property tax bill with nonpayment resulting in a property tax lien on parity with those related to ad valorem tax delinquencies.

ECONOMIC PRESSURES SUBSIDING: The city continues to face challenges as a result of the housing crisis, but aspects of the economy are showing signs of improvement with area labor and housing prices showing improvement.

RATING SENSITIVITIES

UTILITY CREDIT QUALITY: The rating relies heavily on the system's ability to cover shortfalls in special assessments. A change in system credit quality would likely impact the rating on special assessment bonds.

For additional information on the city's special assessment bonds and the system, see the following Fitch Rating Action Commentaries:

'Fitch Affirms Cape Coral, FL's Outstanding Special Assessment Debt at 'BBB+'; Outlook Stable dated May 31, 2013; and, 'Fitch Affirms Cape Coral, Florida's Water and Sewer Revs at 'A'; Outlook Stable' dated May 9, 2013.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, S&P/Case-Shiller Home Price Index, and IHS Global Insight.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'Revenue-Supported Rating Criteria' (June 3, 2012);

--'Water and Sewer Revenue Bond Rating Guidelines' (July 31, 2013).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709499

U.S. Water and Sewer Revenue Bond Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715275

Additional Disclosure

Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=820055

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Kevin Dolan, +1-212-908-0538
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Teri Wenck, +1-512-215-3742
Associate Director
or
Committee Chairperson:
Jessalynn Moro, +1-212-908-0608
Managing Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Kevin Dolan, +1-212-908-0538
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Teri Wenck, +1-512-215-3742
Associate Director
or
Committee Chairperson:
Jessalynn Moro, +1-212-908-0608
Managing Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com