FGUA recieves A- Bond rating
Fitch Rates Florida Governmental Utility Authority (Lehigh Utility System) Util Revs 'A-'
Wednesday November 23, 2:17 pm ET
TAMPA, Fla.--(BUSINESS WIRE)--Nov. 23, 2005--Fitch Ratings assigns an 'A-' rating to Florida Governmental Utility Authority (FGUA, or the authority) (Lehigh Utility System), FL's approximately $25 million utility revenue bonds, series 2005, and affirms the 'A-' rating on approximately $42.3 million outstanding parity debt. The series 2005 bonds are scheduled to sell on Dec. 5 via negotiation to Banc of America Securities LLC and UBS Financial Services, Inc. The Rating Outlook is Stable.
The 'A-' rating on these bonds is based on the growing service area of Lehigh Acres, where the Lehigh utility system (the system) is located, adequate projected debt service coverage assuming automatic inflationary rate increases pursuant to an adopted ordinance, and satisfactory legal provisions. Credit concerns include high rates, management uncertainties given that private third parties manage and operate the authority and the system, and higher than expected capital needs requiring further leveraging of system resources.
FGUA was formed in 1999 by an interlocal agreement to purchase a number of water systems in Florida from a private developer. Current membership includes Polk, Citrus, Lee and Osceola counties. The authority is managed by a governing board whose members include one representative of each entity. FGUA has no employees; all services are provided on a contractual basis. Each utility owned by FGUA is accounted for as a separate enterprise fund and managed independently. The Lehigh Acres utility system was acquired by the FGUA in December 2003. The system is operated under a utility operations and billing and customer service agreement with Severn Trent-Avatar Utility Services LLC, a contractor providing similar services throughout Florida. FGUA has retained Government Services Group, Inc., a private contractor, for the overall management of the authority.
The bonds are secured by a pledge of the trust estate, which includes net revenues and connection fees of the Lehigh system. The system serves the Lehigh Acres area of unincorporated Lee County and is a primarily residential community, 100 square miles in area, located about 12 miles east of Fort Myers. The service area is only 10% built out, with 90,000 platted lots available for development. Wealth indicators for nearby Fort Myers and the county suggest income levels corresponding to the Lehigh Acres service area are in the average range. In July 2005, the system provided service to approximately 11,294 water customers and 9,209 wastewater customers.
The fiscal 2006-2010 capital improvement plan (CIP) totals a sizeable $55.1 million. Current capital costs are substantially higher than the $15.9 million initially estimated at the time the authority purchased the system from Florida Water Services Corp. (FWS), largely as a result of accelerated customer growth patterns. On the water side, consumptive demand exceeded permitted treatment capacity in 2005. In response, the authority will construct an additional water treatment plant with proceeds from this issuance. The plant is expected to be in operation by the end of the 2007 calendar year, but in the interim, the authority has entered into an agreement with Fort Myers for additional supplies.
On the wastewater side, the authority initially believed wastewater treatment capacity was sufficient through 2008. But growth has outpaced projections and in fiscal 2005 the wastewater treatment plant exceeded its permitted flow capacity. The authority is currently negotiating a consent order with the Florida Department of Environmental Protection which identifies flow capacity and disposal capacity issues. The authority's CIP includes projects necessary to mitigate the violations, including the construction of a deep-well injection system to address effluent overload.
Historical financial data through fiscal year 2003 provided by the previous owner of the system, FWS, was based on calendar years and adjusted for expenses, such as property taxes, that applied to FWS as a private company but does not apply to FGUA as a governmental entity. Over that period, operating margins were sound. Audited results for fiscal 2004, the first full year of operations by FGUA, indicate a healthy financial position, with 324 days cash on hand, and sound net revenues to pay debt service. Debt service coverage in fiscal 2004 exceeded projected results with net revenues available equal to 3.4 times (x) annual debt service (ADS) including connection fees and 1.9x with the fees excluded.
Projections compiled by a feasibility consultant indicate a decline in ADS coverage through fiscal 2010 as a result of these bonds and $18.9 million in additional debt planned through the forecast period, but coverage is expected to be adequate at no less than 1.5x and 1.2x ADS through fiscal 2010 including and excluding connection fees, respectively. The projected cash flows include annual automatic inflationary rate increases approved by the authority and an additional 3% hike expected to be approved for fiscal 2009. However, Fitch notes that customer charges currently exceed affordability levels at around 2.4% of median household income, and additional rate increases may pressure system customers.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
Contact:
Fitch Ratings
Kelly McGary, 813-223-6600 (Tampa)
Chris Hessenthaler, 212-908-0773 (New York)
Christine Pollak, 212-908-0526
(Media Relations, New York)
--------------------------------------------------------------------------------
Source: Fitch Ratings
Wednesday November 23, 2:17 pm ET
TAMPA, Fla.--(BUSINESS WIRE)--Nov. 23, 2005--Fitch Ratings assigns an 'A-' rating to Florida Governmental Utility Authority (FGUA, or the authority) (Lehigh Utility System), FL's approximately $25 million utility revenue bonds, series 2005, and affirms the 'A-' rating on approximately $42.3 million outstanding parity debt. The series 2005 bonds are scheduled to sell on Dec. 5 via negotiation to Banc of America Securities LLC and UBS Financial Services, Inc. The Rating Outlook is Stable.
The 'A-' rating on these bonds is based on the growing service area of Lehigh Acres, where the Lehigh utility system (the system) is located, adequate projected debt service coverage assuming automatic inflationary rate increases pursuant to an adopted ordinance, and satisfactory legal provisions. Credit concerns include high rates, management uncertainties given that private third parties manage and operate the authority and the system, and higher than expected capital needs requiring further leveraging of system resources.
FGUA was formed in 1999 by an interlocal agreement to purchase a number of water systems in Florida from a private developer. Current membership includes Polk, Citrus, Lee and Osceola counties. The authority is managed by a governing board whose members include one representative of each entity. FGUA has no employees; all services are provided on a contractual basis. Each utility owned by FGUA is accounted for as a separate enterprise fund and managed independently. The Lehigh Acres utility system was acquired by the FGUA in December 2003. The system is operated under a utility operations and billing and customer service agreement with Severn Trent-Avatar Utility Services LLC, a contractor providing similar services throughout Florida. FGUA has retained Government Services Group, Inc., a private contractor, for the overall management of the authority.
The bonds are secured by a pledge of the trust estate, which includes net revenues and connection fees of the Lehigh system. The system serves the Lehigh Acres area of unincorporated Lee County and is a primarily residential community, 100 square miles in area, located about 12 miles east of Fort Myers. The service area is only 10% built out, with 90,000 platted lots available for development. Wealth indicators for nearby Fort Myers and the county suggest income levels corresponding to the Lehigh Acres service area are in the average range. In July 2005, the system provided service to approximately 11,294 water customers and 9,209 wastewater customers.
The fiscal 2006-2010 capital improvement plan (CIP) totals a sizeable $55.1 million. Current capital costs are substantially higher than the $15.9 million initially estimated at the time the authority purchased the system from Florida Water Services Corp. (FWS), largely as a result of accelerated customer growth patterns. On the water side, consumptive demand exceeded permitted treatment capacity in 2005. In response, the authority will construct an additional water treatment plant with proceeds from this issuance. The plant is expected to be in operation by the end of the 2007 calendar year, but in the interim, the authority has entered into an agreement with Fort Myers for additional supplies.
On the wastewater side, the authority initially believed wastewater treatment capacity was sufficient through 2008. But growth has outpaced projections and in fiscal 2005 the wastewater treatment plant exceeded its permitted flow capacity. The authority is currently negotiating a consent order with the Florida Department of Environmental Protection which identifies flow capacity and disposal capacity issues. The authority's CIP includes projects necessary to mitigate the violations, including the construction of a deep-well injection system to address effluent overload.
Historical financial data through fiscal year 2003 provided by the previous owner of the system, FWS, was based on calendar years and adjusted for expenses, such as property taxes, that applied to FWS as a private company but does not apply to FGUA as a governmental entity. Over that period, operating margins were sound. Audited results for fiscal 2004, the first full year of operations by FGUA, indicate a healthy financial position, with 324 days cash on hand, and sound net revenues to pay debt service. Debt service coverage in fiscal 2004 exceeded projected results with net revenues available equal to 3.4 times (x) annual debt service (ADS) including connection fees and 1.9x with the fees excluded.
Projections compiled by a feasibility consultant indicate a decline in ADS coverage through fiscal 2010 as a result of these bonds and $18.9 million in additional debt planned through the forecast period, but coverage is expected to be adequate at no less than 1.5x and 1.2x ADS through fiscal 2010 including and excluding connection fees, respectively. The projected cash flows include annual automatic inflationary rate increases approved by the authority and an additional 3% hike expected to be approved for fiscal 2009. However, Fitch notes that customer charges currently exceed affordability levels at around 2.4% of median household income, and additional rate increases may pressure system customers.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
Contact:
Fitch Ratings
Kelly McGary, 813-223-6600 (Tampa)
Chris Hessenthaler, 212-908-0773 (New York)
Christine Pollak, 212-908-0526
(Media Relations, New York)
--------------------------------------------------------------------------------
Source: Fitch Ratings
posted by Editor Facts & Myths @ 9:55 PM
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