Fitch Affirms Broward County, FL Professional Sports Facilities Tax Revs at 'AA'; Outlook Stable

Fitch Ratings affirms the 'AA' rating on the following bonds of Broward County, Florida (the county):

--$98.5 million professional sports facilities tax and revenue refunding bonds, series 2006A (Broward County civic arena project);

--$42.2 million professional sports facilities tax and revenue refunding bonds, taxable series 2006B (Broward County civic arena project).

The Rating Outlook is Stable.

SECURITY

The professional sports facilities tax and revenue bonds are secured by a 2% tourist development tax (TDT), a payment of $2 million annually from state sales tax revenue (the sales tax rebate), and certain operating revenues related to the BB&T Center, home of the NHL team, the Florida Panthers.

In addition, the county covenants to budget and appropriate, by amendment if necessary, legally available non-ad valorem revenues to satisfy any deficiency in the reserve account. The reserve account requirement is 50% of maximum annual debt service (MADS).

KEY RATING DRIVERS

COMBINED SOURCES CREDIT STRENGTH: The exceptional 'AAA' general obligation (GO) credit quality of both the State of Florida and Broward County, underscore the strength of the pledge of the sales tax rebate and the reserve account deficiency covenant, respectively. Each mitigates risk to the TDT revenue stream, which is collected against a narrow and discretionary economic activity generally susceptible to volatility in collections.

SOLID COVERAGE: The sum of the pledged tax revenues and the county's deficiency covenant offer a sizable and diverse base of resources available to ensure timely bondholder repayment.

NO ADDITIONAL BONDS: Additional new money bonds are prohibited, and the bonds amortize relatively quickly.

STRONG TOURISM APPEAL: Broward County's reputation as a leading tourism destination featuring varied leisure activities and attractions, an abundance of retail and restaurants, extensive beach line, and comprehensive transportation infrastructure, supports Fitch's expectation for TDT growth over the long term.

RATING SENSITIVITIES

The rating is sensitive to shifts in fundamental credit characteristics including the county's strong financial management practices. A notable weakening in TDT collections could also pose credit concern. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.

CREDIT PROFILE

Broward County is situated on Florida's Atlantic coast between Miami-Dade and Palm Beach counties. The county is home to 31 incorporated municipalities including Fort Lauderdale, Coral Springs, and Hollywood, and ranks as Florida's second largest county with a 2012 population of 1.8 million.

ADEQUATE COVERAGE FROM TDT AND SALES TAX REVENUE ALONE

Historical MADS coverage from the TDT pledged to the payment for the professional sports facilities tax and revenue bonds has strengthened as the economic recovery is boosting tourism related revenues. Tourist visitors in fiscal 2013 were 13 million, up from 11 million two years earlier. Pledged revenues increased 6.8% and 5% in 2012 and 2013, respectively. Fiscal 2013 pledged revenues provided 1.78 times (x) debt service coverage; however, net of the rent payments from the facility operator, a third party unrated entity, the coverage drops to 1.5x. Operator revenues total approximately $4 million (or the equivalent of 0.3 MADS) but in fiscal 2010 the operator negotiated a deferral of the payment.

The lowest reported coverage in recent years was 1.22x, in fiscal 2010 when TDT payments dropped along with the deferral of the rent payment. The present operator is currently seeking to renegotiate the terms of the operating agreements, including the terms of the operator commitment. Any change would be subject to the approval of the county commissioners who have requested a consultant study of the agreements.

OTHER PLEDGED REVENUE STREAMS COULD OFFSET SIGNIFICANT TDT STRESS

The sales tax rebate ($2 million) and the maximum amount of non-ad valorem revenue that would be advanced pursuant to the reserve account deficiency covenant ($7 million) represent 0.6x coverage of MADS. The total general fund non-ad valorem revenue after deducting for transfers and the cost of essential governmental operations not funded from ad valorem revenue, is significant at approximately $274 million in fiscal 2013. While the county's level of commitment to provide the funds is a lesser obligation than a general obligation pledge, the availability of these sources minimizes bondholders' exposure to volatility in the TDT revenue stream. Fitch calculates that fiscal 2013 TDT revenue can decline by 63%, before the total sources available for bond repayment (excluding facility rent) are less than 1.0x MADS.

DEFICIENCY COVENANT MECHANICS ENSURE TIMELY PAYMENT

Pursuant to the county's deficiency covenant and master trust indenture, the county shall be obligated to advance funds to the trustee sufficient to restore any deficiency in the reserve account by the fifth day immediately preceding the date on which debt service is due the payment of which the amount of such deficiency is necessary.

A reserve account deficiency is deemed to exist in the event the reserve fund surety bond fails to pay, which will be determined no later than one business day prior to debt service. The county has sufficiently demonstrated to Fitch its ability to advance non-ad valorem funds pursuant to the deficiency covenant on such short notice for Fitch to assume this source of repayment would be timely.

NO ADDITIONAL NEW MONEY DEBT PERMITTED

No additional bonds are permitted under the indenture, other than for refunding purposes. Original bond proceeds were used to construct the Bank Atlantic Center, a multi-purpose sports and entertainment arena home to the Florida Panthers, a professional National Hockey League franchise. The facility was completed in 1998.

Also, see press release 'Fitch Affirms Broward County, FL'S GO And Sales Tax Ratings; Outlook Stable' dated Jan. 27, 2014.

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, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, National Association of Realtors.

Applicable Criteria and Related Research:

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

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

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827703

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