Fitch Affirms Jupiter, Florida's Water Revenue Bonds at 'AA+'.

NEW YORK -- As part of ongoing surveillance, Fitch Ratings has affirmed the following at outstanding water revenue bonds for the Town of Jupiter, Florida (the Town):

--$24,295,000, series 2003 at 'AA+';

--$9,455,000, series 2002 at 'AA+';

--$10,345,000, series 1998 at 'AA+'.

The Rating Outlook is Stable.

The bonds are secured by a pledge of and first lien on the net revenues and pledged connection fees derived from the operation of the Town's water system.

The 'AA+' rating reflects the water system's solid historical debt service coverage, strong liquidity position, a very affluent and predominantly residential customer base, ample water supply and treatment capacity through projected build-out, and a manageable capital plan that excludes additional debt issuance. Revenue performance has been negatively affected largely due to use restrictions imposed by the South Florida Water Management District. The Town has taken several measures to alleviate the concern, such as discontinuing the annual transfer to the general fund, sized at 6% of gross revenues or approximately $1.2 million annually.

The Town operates a water system that includes the corporate limits of the Town of Jupiter (Fitch rates the Town's general obligation bonds 'AAA' with a stable outlook; see rating action commentary dated Jan. 29, 2009) as well as areas within Juno Beach, Tequesta, and unincorporated areas of Palm Beach and Martin Counties. The system services an estimated population of 80,000 and 40,000 equivalent residential connections (ERC's). Approximately 80% of the water system's customers reside within the Town, a very affluent residential community located on the Atlantic coast in northeastern Palm Beach County (general obligation bonds rated 'AAA' with a Negative Outlook by Fitch). System infrastructure includes a reverse-osmosis plant to treat brackish water drawn from the Florida Aquifer to drinking water quality, and a nanofiltration plant scheduled for completion in 2011 that is expected to ensure future compliance with all current and foreseeable drinking water quality regulations.

Historical financial operations have generated solid debt service coverage levels. Unaudited results for fiscal 2008 show coverage of 2.8 times (x) from all pledged sources and 2.4x excluding connection fees. The Town budgets to the rate covenant plus an amount to fund R&R deposits based on the approximate depreciation of system assets which helps to ensure that coverage is consistently met. Liquidity is very strong. As of Sept. 30, 2008 the water utility has nearly $48 million in unrestricted cash and investments, which is equivalent to 1,701 days cash on-hand, and more than 12x maximum year debt service. Rates are very competitive when compared to regional utilities, and the top ten customers represent less than 3% of gross revenues.

The Town has a current year-round population of 48,792 that increases by 12,000 to 15,000 residents during the winter months. Jupiter is a very affluent community, even by Palm Beach County standards, with median household income levels equal to 134% of the county and 151% of the state. The local economy, traditionally dependent on tourism and leisure spending and construction, has held up well in light of the housing market correction and recession. The Town's 5.7% November 2008 unemployment rate remains lower than the county (7.6%), the state (7.3%), and the nation (6.8%). An increased biotechnology presence led by The Scripps Research Institute is expected to strengthen and diversify economic and educational opportunities. The Town has also recently approved dedicating tax-increment revenues to a 300,000 square foot waterfront development known as Harbourside that will include retail, offices, boat docking, condominiums, and a five-story hotel to enhance the Town's commercial district.

Debt levels are somewhat high as measured on a per-capita ($885) and per customer ($1,657) basis; however, this risk is mitigated by the significant wealth of the customer base and very competitive rates for service. In addition, the Town does not report any additional debt issuance plans through 2013 and existing capacity is deemed adequate to satisfy the demands of the population at build-out (estimated 7-to-10 years at 60,000 people).

Lastly, the bond documents provide adequate bondholder protection including a rate covenant and historical additional bonds test requiring 1.1x coverage from net revenues (1.2x including connection fees) and a debt service reserve fund equal to the lesser of maximum annual debt service, 125% of average annual debt service, or 10% of principal.

Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in first quarter-2009.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.