KBRA Assigns AA Rating, Stable Outlook to City of Jacksonville, FL Special Revenue Bonds

NEW YORK--(BUSINESS WIRE)--KBRA assigns a long-term rating of AA to the City of Jacksonville, Florida Special Revenue and Refunding Bonds, Series 2026A, and Special Revenue Refunding Bonds, Series 2026B. Concurrently, KBRA affirms the AA rating on the City's outstanding Special Revenue Bonds and Special Revenue Bonds (Better Jacksonville Program). The Outlook is Stable.

The rating reflects continued strong coverage of Special Revenue Bond debt service from a basket of non-ad valorem tax revenues, defined as Covenant Revenues. Given the nexus between General Fund revenues and the sufficiency of Covenant Revenues to pay debt service, the rating also derives from the City’s overall financial condition, which is characterized by solid revenue performance, ample reserves and sound liquidity. Recent debt reduction measures have shown positive effect, although the City’s fixed cost burden remains high, reflecting its broad funding responsibilities as a combined City/County government.

Counterbalancing the abovementioned credit strengths is a material contingent risk to future ad valorem revenues from a pending statewide constitutional amendment to expand homestead property exemptions. Pension reforms implemented over the last decade are designed to reduce the net pension liability beginning in January 2031, but pension funding ratios are expected to remain weak in the interim.

Key Credit Considerations

The rating actions reflect the following key credit considerations:

Credit Positives

• Covenant Revenues, in aggregate, have demonstrated stability over economic cycles, allowing for maintenance of anti-dilution test coverage of between 3.9x and 4.9x pro forma MADS in each of the last five fiscal years.
• Debt ratios are manageable, both on a per capita basis and as a percentage of the full market value of real property.

Credit Challenges

• Although the City is addressing high fixed costs through previously enacted pension reform measures and careful adherence to its own debt affordability metrics, required pension contributions are expected to exert continued budgetary pressure over the medium term.
• Additional Special Revenue Bonds are planned to finance the debt funded component of Five-Year Capital Improvement Plan (FY 2026 - FY 2030) totaling approximately $1.77 billion.
• Potential legislation that would reduce or eliminate the amount of Ad Valorem taxes that can be collected on homestead properties, if approved by voters in November 2026, has the potential to materially reduce revenues and negatively impact budgetary flexibility.
• Essential governmental services are statutorily prioritized over debt service on the Special Revenue Bonds.

Rating Sensitivities

For Upgrade

• Reduced pension funding requirements, sustained decline in pension costs and improved operating flexibility, as anticipated beginning in 2031 with the flow of Pension Liability Surtax revenues into the pension system.
• An improvement in wealth indicators, which trail State and national averages.

For Downgrade

• A reduction in ad valorem General Fund revenues that results in increased use of Covenant Revenues for payment of essential governmental purposes and reduces the amount of Covenant Revenues available for Special Revenue Bond debt service.

To access ratings and relevant documents, click here.

Methodologies

• Public Finance: U.S. Special Tax Revenue Bond Rating Methodology
• Public Finance: U.S. State Annual Appropriation Obligation Rating Methodology
• Public Finance: U.S. Local Government General Obligation Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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