Fitch Upgr Indian Trace Dev. Dist., Florida Spec. Assess. Bnds To 'A-'.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 19, 2002

Fitch Ratings has assigned an underlying 'A-' rating to the Indian Trace Development District (Weston, Florida)'s approximately $30 million Water Management Variable Rate Demand Special Benefit Assessment Refunding Bonds Series 2002. By closing, Fitch expects to assign ratings based on a municipal insurance policy provided by MBIA Insurance Corp. and liquidity support in the form of a standby bond purchase agreement provided by Dexia Credit Local. Fitch rates MBIA's insurer strength 'AAA' and Dexia's short-term obligations 'F1+'. The bonds are scheduled to be sold in late July through negotiation with Salomon Smith Barney. The district expects to enter into an interest rate swap agreement with Salomon Smith Barney through which the district will pay a fixed interest rate for the life of the bonds. Fitch upgrades the district's $48.8 million in outstanding parity debt to 'A-' from 'BBB'. This issue, along with $5.1 million in unused construction funds, will refund a portion of series 1997 bonds.

The upgrade to 'A-' on the Indian Trace Development District's (the district) special benefit assessment bonds recognizes the successful near-completion of the district's development and the resulting significant decline in developer risk. In addition, as a new city just incorporated in 1997, the city of Weston has only recently had the opportunity to establish its track record of conservative budgeting, high reserve levels, and large cash balances. The rating also considers the declining but still satisfactory rate of collections of the assessments securing the bonds, financial flexibility providing a margin for debt service payments in case of delinquencies, and Weston's above-average wealth indicators. The district is a dependent special district of the city of Weston, which began as a master-planned residential community. The city also includes the Bonaventure Development District, which reportedly makes up about 20% of the city's population and 15% of its tax base.

The series 2002 refunding bonds are secured by a senior lien on all special benefit assessments appropriated, levied, and collected by the district within Basin I. This area essentially includes all of the developable land within Weston except for Bonaventure. Assessment payments in fiscal 2001 covered senior lien debt service 2.1x, and covered all expenditures, including subordinate debt and operating expenses, a sound 1.3x. Subordinate debt of $21.1 million, which Fitch does not rate, fully matures in 2011. No additional parity bonds are planned, and the city has no plans to issue any debt until at least 2010.

Assessments have an equal lien on property with county ad valorem taxes, and are levied by the city to cover total debt service and operating expenses just 1.04 times (x), so delinquencies, which have increased in the last few years, pose a significant risk. However, the city has flexibility in allocating assessment revenues between operations and debt service and has generally budgeted operating needs conservatively. Substantial reserves in both debt service and operating funds, while not pledged to bondholders, could provide an additional cushion in the event of a shortfall in assessment receipts. Also, the county sells tax lien certificates, which include the assessments, by June 1 of each year and those sales have reportedly been successful.

The district's developer, St. Joe/Arvida Company (Arvida, or the developer), now owns only 0.7% of property in Basin I, and pays 8% of the assessments, which are based on land values. Arvida's share of assessment payments declined from 33% in 1996, significantly reducing concentration risk over the last five years. No other payer is responsible for more than 1.4% of assessments. The district is about 88% residential, and the non-residential base consists mainly of office space.

Weston is located in Broward County, 15 miles west of Fort Lauderdale and 35 miles northwest of Miami at the crossroads of Interstate-75, I-95, and the Sawgrass Expressway. The 2000 census population was 49,286, and city officials estimate the current population at about 55,000. As of January 2002, there were 16,847 residential units, of which 92% were single family homes. Arvida projected completion of all planned units by 2004, and development appears to be slightly ahead of schedule, with less than 500 units still to be developed or under construction. The average market value per single family home was $246,129, with a high of over $7 million, indicating substantial wealth among assessment payers. Market value per capita is above average at about $69,000. Employment data for the city is not available, but Broward County's unemployment rate was a moderate 5.5% in May 2002.