Fitch Affirms Jacksonville, Florida's BJP Transportation Revs at 'AA'; Outlook Negative.

NEW YORK -- In the course of routine surveillance, Fitch Ratings affirms Jacksonville, Florida's (the city) approximately $534.4 million in BJP transportation revenue bonds. The Rating Outlook is Negative.

The 'AA' on the BJP transportation revenue bonds reflects its adequate debt service coverage, sound legal provisions, and the general credit characteristics of the city including strong management, healthy financial position, and a diverse economy. The Negative Outlook reflects the city's plans to further leverage the security to the point where coverage levels may be inconsistent with the current rating category as well as Fitch's concerns for further potential weakening of pledged revenues.

The bonds are secured by the city's half-cent local option transportation sales tax and constitutional fuel tax revenue on a subordinate basis to bonds issued by the State of Florida for the benefit of the Jacksonville Transportation Authority (JTA). The JTA has pledged under an interlocal agreement with the city not to incur additional debt senior to or on parity with the bonds now offered. Pledged revenues have historically been relatively stable with a slight 1.9% decline in fiscal 2008. Maximum annual debt service (MADS) coverage remained adequate at 1.66 times (x) while coverage of annual debt service was notably higher, 2.55x, due to ascending debt service. Year to date revenues for fiscal 2009 are down 4.1% from a year prior. If revenues end fiscal 2009 down 4.1% from fiscal 2008, MADS coverage would decline to 1.59x while actual fiscal 2009 debt service coverage would be 2.44x.

Located on the northeastern coast of Florida, Jacksonville is the most populous city in Florida; the 2007 estimated population was 805,605, an increase of 9.4% over the 2000 census figure. The city's diverse economic base has a strong long term profile bolstered by its historical naval presence, large cargo port with a natural river harbor, and major banking, insurance, health care, and manufacturing industries. While the effect of the current economic downturn has so far been less severe in the city than in other parts of the state, unemployment has increased to 9.4% in February 2009 from 4.5% a year prior.

Financial operations are strong resulting in operating surpluses in four out of the last five years. Unaudited fiscal 2008 results show a $14.2 million surplus driven by the implementation of an effective expenditure reduction program and additional fees instituted to offset the impact of recent property tax reform. The unreserved fund balance plus a $40 million emergency reserve held in the general fund equal a satisfactory 8.8% of spending. Estimates for fiscal 2009 year end indicate break even results.

Overall debt levels are moderate at 3.9% of taxable assessed value, or $2.952 per capita. The city's capital improvement plan (CIP) for fiscal 2009-2013 is relatively small at $77 million, although it excludes all Better Jacksonville Plan (BJP) projects, which at $2.3 billion account for the majority of the city's capital needs. The CIP is fully funded and projects are concentrated in roads, accounting for roughly 50% of spending.

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