CHICAGO (S&P Global Ratings) Feb. 11, 2019--S&P Global Ratings assigned its 'AAA' long-term rating to Florida's Department of Transportation right-of-way acquisition and bridge construction refunding bonds, series 2019A. At the same time, S&P Global Ratings affirmed its 'AAA' general obligation (GO) rating on the state's parity debt and its 'AA+' rating on the state's appropriation debt. The outlook on all ratings is stable. "The 'AAA' rating reflects our view of Florida's continued good employment and population growth, continued good general revenue growth and revenue collections through December 2018 that exceed estimates and previous-year collections, and structural budgetary balance," said S&P Global Ratings credit analyst Carol Spain. Other factors include:
- Reserves that, coupled with trust fund reserves, are at levels we still consider very strong; and
- Relatively well-funded pension and moderate debt burden on most measures; we expect that the state's debt burden will remain manageable and not increase significantly based on current debt authorization and bond issuance plans.
Although a pledge of gas taxes, consisting of certain motor and diesel fuel taxes transferred from the fuel tax collection trust fund to the state transportation trust fund (STTF) and then to the right-of-way acquisition and bridge construction trust fund (RWABCTF) secures the bonds, Florida's full faith and credit pledge does so as well. Our 'AAA' rating on the series 2019A bonds reflects our assessment of the state's full faith and credit pledge. We understand that management will use bond proceeds to refund all or a portion of the existing series 2009A and 2009B Department of Transportation right-of-way acquisition and bridge construction and refunding bonds and to pay costs of issuance. There is no extension of maturities, and relatively level annual savings will be taken throughout the remaining life of the refunding bonds. (For more information on the state's GO rating, see the summary analysis on Florida, published July 11, 2018, on RatingsDirect.) "The stable outlook reflects our view of Florida's continued economic growth, positive revenue trends, and recent structurally balanced budgets," added Ms. Spain. The outlook also reflects our expectation that the state will maintain strong balances; furthermore, given its close monitoring of revenues, should there be unexpected material revenue shortfalls, we believe Florida will make adjustments to its budget as needed to maintain structural budgetary balance. However, should the state rely significantly on nonrecurring solutions to address ongoing spending trends without a plan to replenish to historically strong reserve levels, this could pressure the rating. Downside risk for the rating also includes a particularly severe economic downturn compared with that of the nation or changes in federal policy or aid that materially stress the state. If severe and frequent catastrophic hurricanes were to make landfall in Florida and substantially weaken the statewide economy or lead to debt issuance that increases the tax-supported debt burden for Florida above that of its state peers, this could pressure the rating.
