Fitch Ratings has affirmed the 'AA' rating on the following Florida
Municipal Loan Council (FMLC) revenue bonds:
--$14.6 million, series 2010B.
The Rating Outlook is Stable.
The bonds are limited obligations of the Florida Municipal Loan Council
(FMLC), payable from payments equal to debt service made by the
borrower, the Village of Palmetto Bay, FL (the village), pursuant to the
The bonds were issued pursuant to bond resolutions adopted by the FMLC
and a Trust Indenture, date Aug. 1, 2010 between the issuer and the
trustee (Deutsche Bank).
Pursuant to the indenture, the issuer has assigned and pledged all of
its right, title, and interest in and to the loan agreement, including
the right to receive loan repayments, to the trustee for the benefit of
Pursuant to the loan agreement, the village covenants to budget and
appropriate (CB&A) in its annual budget, by amendment if necessary, an
amount of non ad valorem revenue to satisfy its loan agreement.
The rating is based on the security structure of the loan agreement as
well as the general credit characteristics of the obligor, the village.
The loan security includes a covenant to budget and appropriate legally
available non ad valorem revenues. FMLC is a conduit issuer.
KEY RATING DRIVERS
GOOD COVERAGE BY AVAILABLE REVENUES: Available non ad valorem revenues
provide sound debt service coverage. Non ad valorem resources and
consequently debt service coverage should remain good, given the
village's reliance on these revenues to fund operational needs.
STRONG FINANCIAL FLEXIBILITY: Strong financial flexibility is evident in
the maintenance of high reserve levels, supported by prudent financial
management. Maintenance of ample reserve levels is considered
fundamental to the current rating category.
ECONOMY BENEFITS FROM COUNTY EMPLOYMENT OPPORTUNITIES: Palmetto Bay is a
mainly residential village that benefits from its proximity to Miami and
the diverse employment base of Miami-Dade County. Village wealth levels
are significantly above average.
MODERATE DEBT LEVELS: Overall debt is expected to remain moderately low,
aided by the limited capital needs of the village.
ADEQUATE DEBT SERVICE COVERAGE
Revenues included under the covenant are broad and diverse, accounting
for 53% of total governmental revenues in fiscal 2011. Coverage of
maximum annual debt service (MADS), inclusive of parity debt, was 3.4
times (x), based on fiscal 2011 audited figures and is projected at
about 2.3x based on fiscal 2012 budgetary base figures. This coverage
level allows for sufficient excess revenues to fund general government
operations. Estimated fiscal 2012 coverage was negatively affected by an
accounting change that allocated certain intergovernmental revenues
(about $600 thousand in total) out of the general fund and into
restricted funds. In addition, the estimate is based on budgeted
figures. The village has a history of cautious budgeting that has
resulted in revenues coming in better than budget estimates, and this
will likely improve coverage levels.
The anti-dilution test requires the average of non ad valorem revenues
for the prior two fiscal years to cover MADS at least 1.5x and projected
MADS for all debt secured or payable from non ad valorem revenues must
not exceed 20% of governmental fund revenues. The test is reasonably
rigorous categorizing about 82% of general fund expenditures as
'essential', requiring those needs to be funded before payment of CB&A
Created with strong voter approval in 2002, the village, with a 2010
population of 23,410, benefits economically from its location in
Miami-Dade County (GOs rated 'AA' with a Negative Outlook by Fitch),
approximately 15 miles south of the city of Miami (GOs rated 'A-' with a
Negative Outlook by Fitch). The tax base is composed primarily of
low-density residences, and the limited commercial presence is oriented
around automotive dealerships, large-box retailers, and office
buildings. After multi-year declines in taxable assessed values (-10%
and -5% in fiscal years 2010 - 2011, respectively), the county assessor
is estimating growth of about 2.2% for fiscal 2012. The fiscal 2012 tax
rate of 2.447 mills is low for Florida and is expected to remain at that
level for fiscal 2013. Wealth levels are significantly above state and
national averages, and the village reports unemployment at below the
county's level, which at 9% in April 2012 was above state (8.3%) and
national (7.7%) levels.
GOOD FINANCIAL OPERATIONS WITH STRONG RESERVE LEVELS
The village's financial flexibility is robust, enhanced by strong
financial management and evidenced by a trend of strong reserve
balances. The fiscal 2010 unreserved fund balance of $9.6 million
equaled 72% of spending. For fiscal 2011, the village reported an
unrestricted fund balance (the sum of the unassigned, assigned, and
committed fund balance under GASB 54) of $11.3 million, or 86% of
spending. On a budgetary basis, the fiscal 2012 budgeted total ending
balance is about $8 million or 60% of spending. This figure may increase
by about $1 million, as certain expected capital expenditures were not
made during the year and budget performance was better than expected.
Liquidity levels have been strong and current cash balances total about
$10 million or about 75% of fiscal 2012 budgeted expenditures. The
village expects fiscal 2013 revenues to be near current year levels and
has asked departments to hold expenditures flat. About $1 million in
capital needs spending is projected. The village expects that ending
balances will be maintained at close to current year levels.
DEBT LEVELS ARE MODERATE
Debt levels are low, with direct debt at $838 per capita and 0.6% of
taxable assessed value, and overall debt at $1,394 per capita and 1% of
taxable assessed value. Fitch anticipates that the direct debt burden
will remain low as no near-term debt issuance is planned. Capital needs
are modest, and the village intends to fund them on a pay-go basis. Debt
amortization is well below average at 31% of principal retiring within
The village maintains a defined contribution plan for its employees
under which it contributes 6% of employees' salaries and can match up to
another 6%. Costs are modest, with the fiscal 2011 pension payment equal
to about $231,000, or 1.6% of revenues. The village does not offer any
OPEB except an implicit subsidy.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope, University Financial Associates,
S&P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com, and
National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated Aug. 15, 2011;
--'U.S. Local Government Tax-Supported Rating Criteria', dated Aug. 15,
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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