Fitch Affirms Hillsborough County, FL's Sales Tax Bonds at 'AA+'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the following rating for Hillsborough County, Florida sales tax bonds:

--$67.5 million capital improvement revenue bonds, series 2012 at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The capital improvement revenue bonds (sales tax bonds) are payable from the county's share of the proceeds of the local government half-cent sales tax, on parity with outstanding series 2006 bonds.

KEY RATING DRIVERS

AMPLE HALF-CENT SALES TAX COVERAGE: Debt service coverage of half-cent sales tax bonds increased to 9.5x maximum annual debt service (MADS) as of fiscal 2015 after five consecutive years of revenue growth.

TOP-LINE CREDIT STRENGTH: The county's general obligation (GO) bond rating ('AAA', Stable Outlook) is based on its consistently healthy financial position, manageable liabilities burden, and the broad-based and diverse economy.

RATING SENSITIVITIES

DETERIORATION OF RESERVES: Ratings on the revenue bonds are capped by the GO rating. Significant operating deficits leading to declines in reserves could lead to downgrades in the GO rating as well as non-ad valorem bond ratings.

PLEDGED REVENUE DOWNTURN: Sustained reductions in pledged sales tax revenues that narrow debt service coverage would be viewed negatively.

CREDIT PROFILE

Located midway down the western coast of Florida, Hillsborough County encompasses 1,266 square miles. The city of Tampa is the county seat and largest city. The 2013 county population estimate of 1.35 million has grown at a moderate pace in recent years, consistent with population trends during the 2000 to 2010 decade when population growth averaged 2.1% annually.

HIGH DEBT-SERVICE COVERAGE

Half-cent sales tax collections have historically supported wide coverage of debt service. Fiscal 2015 revenues cover MADS by 9.5x. Following a cumulative 22% decline from fiscal 2007 through fiscal 2010, half-cent sales taxes have increased in each of the past five fiscal years, exceeding their pre-recession peak in fiscal 2015. Year-to-date collections for the first four months of fiscal 2016 are up by 7.7% over the same period last year. Year-to-date collections already provide 3.4x coverage of MADS.

A 1.35x MADS ABT and lack of a debt service reserve for the series 2012 capital improvement revenue bonds are offset by the ample coverage. Additional issuance is also restricted by the use of excess half-cent sales tax revenues to fund county operations, and management indicated that there is currently no plan to further leverage sales tax revenues.

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

Fitch recently published exposure drafts of state and local government tax-supported criteria (Exposure Draft: U.S. Tax-Supported Rating Criteria, dated Sept. 10, 2015 and Exposure Draft: Incorporating Enhanced Recovery Prospects into U.S. Local Tax-Supported Ratings, dated Feb. 2, 2016). The drafts include a number of proposed revisions to existing criteria. If applied in the proposed form, Fitch estimates the revised criteria would result in changes to less than 10% of existing tax-supported ratings. Fitch expects that final criteria will be approved and published in the beginning of the second quarter of 2016. Once approved, the criteria will be applied immediately to any new issue and surveillance rating review. Fitch anticipates the criteria to be applied to all ratings that fall under the criteria within a 12-month period from the final approval date.

In addition to the sources of information identified in the applicable criteria specified below, this action was informed by information from CreditScope and Lumesis.

Applicable Criteria

Exposure Draft: Incorporating Enhanced Recovery Prospects into US Local Tax-Supported Ratings (pub. 02 Feb 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875108

Exposure Draft: U.S. Tax-Supported Rating Criteria (pub. 10 Sep 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869942

Tax-Supported Rating Criteria (pub. 14 Aug 2012)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria (pub. 14 Aug 2012)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1001730

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001730

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst:
George M. Stimola, +1-212-908-0770
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Nicole Wood, +1-212-908-0735
Director
or
Committee Chairperson:
Steve Murray, +1-512-215-3729
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
New York
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
George M. Stimola, +1-212-908-0770
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Nicole Wood, +1-212-908-0735
Director
or
Committee Chairperson:
Steve Murray, +1-512-215-3729
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
New York
elizabeth.fogerty@fitchratings.com