KBRA Affirms AAA Rating for Orange County, Florida’s Sales Tax Revenue Bonds; Outlook is Stable
7 Jun 2024 | New York
KBRA affirms the long-term rating of AAA with a Stable Outlook for Orange County, Florida’s Sales Tax Revenue Bonds. The rating applies to the county’s outstanding Sales Tax Revenue Bonds, of which approximately $127.05 million were outstanding as of September 30, 2023.
The long-term rating reflects exceptional MADS coverage, the historical resilience and growth of Sales Tax Proceeds, and the presence of ample reserves in the Sales Tax Trust Fund. The flow of funds is an “open loop” structure which makes excess sales tax revenues in the Sale Tax Trust Fund, after payment of debt service, available to fund County operating and capital needs. The County has historically utilized such amounts to fund general fund services, transportation capital construction and public works.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Sales Tax Proceeds provide ample existing and projected MADS coverage, even under KBRA stress scenarios.
- The historically strong balance in the Sales Tax Trust Fund lends important revenue flexibility and liquidity.
- Sales Tax Revenue Bond debt levels are low and outstanding debt is scheduled to mature in ten years. The County plans to issue approximately $100 million Sales Tax Revenue Bonds in coming years.
Credit Challenges
- The leisure and hospitality sector, which contributes to much of the County’s economic activity, is subject to macro-economic and other large-scale event risks which contribute to volatility in Sales Tax Proceeds.
- A high unemployment rate that persists for several quarters could adversely impact County-wide retail sales and, in turn, Sales Tax Proceeds.
Rating Sensitivities
For Upgrade
- Not applicable
For Downgrade
- Significant deterioration in MADS coverage.
- Negative trend in receipt of Sales Tax Proceeds due to significant economic disruption or major modification of the statutory distribution formula.
To access rating and relevant documents, click here.