Fitch Affirms Jupiter, FLs $16MM GO Bonds; Outlook Stable

Fitch Ratings has affirmed the 'AAA' rating on the following general obligation (GO) bonds for Jupiter, FL (the town):

--$5.2 million GO bonds, series 2001;

--$10.7 million GO bonds, series 2005.

The Rating Outlook is Stable.

SECURITY

The bonds are backed by the full faith, credit, and taxing power of the town.

KEY RATING DRIVERS

STRONG FINANCIAL MANAGEMENT: The town benefits from an experienced and prudent management team evidenced by consistently positive operating results.

HIGH FINANCIAL RESILIENCE: Robust general fund reserves combined with ample revenue raising capabilities provide robust financial flexibility.

EXPANDING LOCAL ECONOMY: Economic indicators are favorable and the traditionally limited local economy has shown signs of diversification.

POSITIVE DEBT PROFILE: Rapid amortization and expected population and tax base growth will quickly reduce the town's already moderately low debt burden, given the lack of plans for additional debt. Carrying costs including pension and other post-employment benefits (OPEB) are manageable.

RATING SENSITIVITIES

CONTINUED AMPLE FINANCIAL FLEXIBILITY: The rating is sensitive to shifts in fundamental credit characteristics including the town's strong financial management practices. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

Jupiter is located on the eastern coast in Palm Beach County (GOs rated 'AAA'; Stable Outlook by Fitch) and has an estimated year-round population of 55,000.

STRONG, GROWING LOCAL ECONOMY

Recent notable growth in both the biotech and aerospace industries has diversified the somewhat narrow economy, which traditionally was based in tourism, healthcare and retail. The town has added approximately 1,000 jobs in biotech and aerospace industries since the recession began. The relatively recent Max Planck Institute for Neuroscience continues to meet its job creation goals.

The town's assessed valuation has grown somewhat over the past two years after notable declines during the recession. The newly opened Harbourside development, a $150 million mixed use development, will augment the tax base. Fitch views management's projections of measured tax base growth going forward as conservative.

Wealth indices for the town are markedly above average, as exhibited by per capita money income at 168% of the state and 156% of the national levels. Employment metrics are similarly favorable, with unemployment rates historically below those of the state and the nation. Healthy employment growth of 3.5% over the past year allowed for a simultaneous absorption of the solid 2.2% labor force growth and a reduction in unemployment to 3.8% in November, 2014.

ROBUST FINANCIAL PROFILE

The town has consistently demonstrated positive operating results, building robust reserves during the course of the recession. The low tax rate provides ample revenue-raising capacity under the millage cap. Healthy liquidity and the flexibility to reduce expenditures round out the exemplary financial profile.

Fiscal 2013 concluded with a $3 million net operating surplus in the general fund, equal to 8% of spending. Reserves increased to a very high 54.6% of expenditures and transfers out. The strong financial performance was in line with historical positive operating trends since at least fiscal 2007, with fund balance drawdown in one of those years attributable to capital spending. Liquidity has been ample throughout the period, with cash and investments exceeding liabilities by a wide margin.

The county achieved these financial results while maintaining a very low 2.5 operating millage. Fitch notes positively that there is ample revenue-raising capacity under the 10-mill cap. Total taxes, of which property taxes are more than half, represent about two-thirds of total revenues, and they have shown the first uptick since the recession began. Fitch believes the town also has solid expenditure flexibility.

Expected fiscal 2014 results indicate an addition to fund balance, despite a modest appropriation of fund balance during the budgeting process. Fitch expects the town will realize an operational surplus given that revenues have tracked above budget and expenditures below budget. Preliminary projections for fiscal 2015 indicate that the town will not utilize the full appropriation and may in fact add to fund balance.

NO PRESSURES FROM LONG-TERM OBLIGATIONS

Overall debt levels are moderately low at $3,617 on a per capita basis and 2.4% of market value. Rapid amortization, at 89.2% of principal retired within ten years, no future debt plans, and anticipated population and tax base growth will quickly reduce the existing debt burden.

The fiscal 2015-2019 Community Investment Program (CIP) totals a modest $64.8 million. The largest expenditure is $30 million for the water system. No debt is planned over the course of the CIP. Pay-as-you go capital financing, which Fitch views as a source of financial flexibility, is noteworthy at $19.6 million, averaging less than $4 million per year. This is by far the largest funding source for general government needs, with various fees, revenues, and grants comprising the remainder.

Pensions are provided for general employees through the state-run Florida Retirement System (FRS) and for police officers through the town administered Municipal Police Officers Retirement Trust (MPORT). Total annual pension contributions are manageable at 7.3% of general fund expenditures and are not expected to increase materially in the immediate future. The FRS funded ratio is a reported 85.4%, or approximately 79%, after adjusting for Fitch's assumed 7% rate of return. MPORT funding has improved over the past few years to a reported 79.7% or estimated Fitch adjusted 76%. Fitch considers both funding ratios to be satisfactory.

OPEB is currently funded on a pay-go basis and both the ARC and actual costs are nominal as a percentage of government fund spending. Carrying costs including debt service, pension and OPEB pay-go were a very manageable 15.2% of total fiscal 2013 governmental expenditures.

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, and the 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=978693

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