Published: March 15, 2010
Fitch Affirms Tampa, Florida Solid Waste $137.7MM System Revenue Bonds at 'A'
NEW YORK - (BUSINESS WIRE) - Fitch Ratings takes the following rating action on Tampa, Florida as
part of its continuous surveillance effort:
--$13,445,000 City of Tampa solid waste system taxable-exchangeable
refunding revenue bonds (McKay Bay Refuse-to-Energy Project), series
1999A affirmed at 'A';
--$124,205,000 City of Tampa solid waste system revenue bonds (McKay Bay
Refuse-to-Energy Project), series 1999B affirmed at 'A'.
The Rating Outlook is Stable.
RATING RATIONALE:
--Good competitive position as city-wide fees keep tipping fee increases
minimal.
--Almost three-quarters of system revenues are under city control
through user fees collected monthly on combined utility bill.
--The city of Tampa (the city) has good control over revenues as it
collects all residential waste and 60% of commercial waste with
remaining under hauler contract subject to typical solid waste contract
renewal risks.
--Recession-driven declines in waste generation and revenue are
prudently managed by operating efficiencies and expenditure reductions.
--Debt service coverage levels are forecast to decline but remain
adequate for the rating level.
KEY RATING DRIVER(S):
--Ability of the city to continue to manage protracted declines in waste
supply through fee increases, expenditure reductions and operating
efficiencies.
--Maintenance of adequate debt service coverage.
SECURITY:
The bonds are secured by net revenues of the city of Tampa's solid waste
system.
CREDIT SUMMARY:
The city operates an integrated Tier III solid waste system serving
89,300 customers comprising 91% residential and 9% commercial accounts.
The city collects 100% of residential waste and 60% of commercial waste
with the remaining 40% of commercial waste under contract with a private
hauler, Waste Management. Waste disposal is through a refuse-to-energy
facility operated by Wheelabrator McKay Bay Inc. (a subsidiary of Waste
Management). The facility's operating contract expires in 2021,
concurrent with final maturity of the bonds. Since a facility retrofit
(financed with the series 1999 bonds) was completed in fiscal 2002, the
solid waste system has generally exceeded projections and has met its
minimum annual waste guaranty to the refuse-to-energy facility.
The system is an enterprise fund of the city, with bills for solid waste
services on the combined utility bill along with water and wastewater
services. Over half of city waste is from commercial customers with more
than a third from residential customers. Electricity sales to Tampa
Electric Company (TECO) comprise a moderate 12.4% of system revenue
under a contract that expires in fiscal 2011. The hauling contract is
subject to periodic renewal risk and expires in 2012. Tip fees provided
7.7% of fiscal 2009 revenue. The recession has slowed system waste with
fiscal 2009 tonnage up 1.8% following two years of decline.
Solid waste fees have not been increased since fiscal 2006 and
residential fees are a bit higher than other regional system rates but
include more extensive services. The tipping fee is also somewhat higher
than those of neighboring facilities, but there is limited competition
due to inter-local agreements, excessive transportation distances and
restrictions on acceptance of out-of-county waste by competitors. The
high proportion of revenues collected with the utility bill allows for
moderate increases in tipping fees.
Financial operations are sound but have experienced pressure due to the
recession. Debt service coverage through fiscal 2009 has remained
satisfactory and above the rate covenant of 1.10 times (x); up to 10% of
reserves may be used to meet the rate covenant. The city has not used
reserves to meet requirements since the retrofit was completed in 2002.
Fiscal 2009 revenues available for debt service provided debt service
coverage of 1.45x, down slightly from 1.53x in fiscal 2008. Projected
coverage for fiscal 2010 is budgeted to decline and hover close to the
rate covenant, although actual results generally exceed the budget.
Higher cash balances have contributed to increased unrestricted net
assets rising to $24.3 million in fiscal 2009 up from $8.3 million in
fiscal 2005.
The city continues to manage the volatility in waste generation with
expenditure controls and efficiency improvements. These actions have
mitigated the impact of the recession, evidenced by the collapse of the
housing market and employment losses, and Fitch expects management to
continue to make necessary adjustments. Long-term service area prospects
remain fairly positive considering the low cost of living, availability
of affordable real estate and excellent transportation network. The
economic base is diverse including a sizeable military, education and
healthcare presence, year-round tourism, cultural, and recreational
attractions.
Applicable criteria available on Fitch's website at 'www.fitchratings.com'
include:
--'Tax-Supported Rating Criteria' (Dec. 21, 2009);
--'Revenue Supported Rating Criteria' (Dec. 29, 2009);
--'Rating Guidelines for Solid Waste Revenue Bonds' (Dec. 30, 2009).
Additional information is available at 'www.fitchratings.com'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.
Fitch Ratings, New York
Janet H. Martin, +1-212-908-0507
Michael
Rinaldi, +1-212-908-1833
Cindy Stoller, +1-212-908-0526 (Media
Relations)
cindy.stoller@fitchratings.com
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