Fitch Rates Palm Beach County, Florida's $15.5MM Non-Ad Valorem Bonds 'AA+'.

TAMPA, Fla. -- Fitch Ratings has assigned an 'AA+' rating to Palm Beach County, FL's (the county) approximately $15.5 million public improvement revenue bonds, series 2006 (Parking Facilities Expansion Project). The bonds are scheduled to price via negotiation on Nov. 20 with a syndicate led by Jackson Securities, with the proceeds used to finance expansion of the judicial center parking garage supporting the Palm Beach County courthouse in downtown West Palm Beach.

Fitch also affirms the following underlying ratings:

--$692 million of outstanding parity bonds payable from non-ad valorem revenues 'AA+';

--$338 million in general obligation (GO) bonds 'AAA'.

The Rating Outlook is Stable.

The 'AA+' rating reflects the diverse mix of non-ad valorem revenue sources, which the county covenants to budget and appropriate to pay debt service, as well as the county's vibrant and diverse economic base, sound financial position, and moderate debt levels. After this issuance the covenant to budget and appropriate legally available non-ad valorem revenue secures approximately 66% of the county's outstanding debt.

The strong debt service coverage on these bonds and parity obligations reflects the substantial role of non-ad valorem revenue in funding the county's essential services. Fiscal 2005 revenues cover maximum annual debt service (MADS) on all parity debt, including debt issued through the Sunshine State loan pool, by 4.98 times (x). Legal provisions limit additional parity debt service to an amount covered 2.0x by non-ad valorem revenues, but the practical limitation is higher given the need for excess revenue to fund operations. The latter point should ensure that coverage remains quite strong.

Palm Beach County is one of the nation's wealthiest, with per capita personal income levels 42% and 35% higher than state and national averages, respectively. The economic base is diversified, balancing luxury tourism and technology manufacturing in the coastal areas with agriculture in the western portion of the county. The county's unemployment rate fell to 4% in 2005 from 5% one year prior. Debt levels are moderate and are expected to remain manageable given well-established debt affordability guidelines and steady tax base and population growth. Assessed valuation growth has been rapid, recording double digit annual growth since fiscal year 2001 and surging 23.8% for fiscal year 2007 to reach nearly $161 billion.

The county's low tax rates, made possible by its prosperous tax base, provide ample revenue-raising flexibility. General fund operations are strong, and following a deficit in fiscal 2004 resulting from one time capital investments and reimbursable hurricane expenditures, the county realized a sizeable surplus in fiscal 2005. Net income after transfers of $34.2 million at the close of fiscal 2005 increased the general fund balance to a healthy $282 million equal to 26% of spending. Conservative budgeting in fiscal year 2006 is expected to result in a small surplus of about $2.8 million in the general fund on an unaudited basis. The property tax rate, already quite low, was further reduced to 4.28 mills from 4.45 for the 2007 budget year.

Earlier this year county commissioners approved a new location for the Scripps research facility, originally planned for the rural Mecca Farms site located in the northwestern portion of the County. The county and Scripps have reached agreement to develop the facility on and adjacent to the campus of Florida Atlantic University (FAU). Roughly $16 million in bond anticipation notes (BANs) will be issued later this month to acquire a tract of land adjacent to FAU for the project.

The county previously sold two series of bonds (2004A and 2005A), totaling $193 million and secured by a CB&A from non-ad-valorem revenues, for the Mecca Farms site acquisition and construction of the Scripps facility, respectively. The series 2004A bonds have an extraordinary call feature that allows them to be redeemed from proceeds of land sales, which is likely to occur now that development is set to commence at FAU. Although the timing of the sale and value of the land is uncertain, the debt associated with the land is already included in county debt ratios which remain low on a direct basis and moderate on an overlapping basis.

The series 2005A bond proceeds, while intended for use at the Scripps site are legally available to be used for construction at the new site. The county will issue an additional $100 million in bonds for Scripps development, secured by the CB&A pledge of the county, which will reimburse the forthcoming $16 million in BANs, repay an $11 million banknote, and finance construction at the new site. Costs for the county were expected to be higher at the Mecca site, which required significantly more infrastructure than is needed at FAU.

Additional future borrowing plans for fiscal year 2007 include $17.3 million for the purchase of environmentally sensitive land, secured by the county's covenant to budget and appropriate (CB&A) legally available non-ad-valorem revenue. Financings planned for the next several fiscal years, also secured by the county's CB&A, total over $400 million for a county jail, courthouse facilities and other government buildings.

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