WEST PALM BEACH, Fla. - The same new budget-slashing law that resulted in dozens of layoffs at the South Florida Water Management District has also prompted Standard & Poors to lower the district's credit rating.
"The downgrade reflects recent legislative changes that we believe have significantly reduced the district's financial flexibility," said John Sugden-Castillo, a Standard & Poors credit analyst, in report dated Aug. 10. The report cites Senate Bill 2142, which caps the amount of revenue the district can raise through property taxes.
The rating dropped from AAA to AA+. The difference between the ratings is minimal and Standard & Poors said it expects that the district's debt service, about $44 million-a-year, "will remain a manageable portion of the district's budget."
Staff and benefit cuts at the district are being made to comply with a new law, backed by Gov. Rick Scott, requiring the district to slash by 30 percent -- about $128 million -- the money it can raise through property taxes. To accomplish that, the district's governing board approved a proposal to set a tax rate just under 44 cents for every $1,000 of taxable value, down from this year's rate of 62 cents. Based on that rate, a home with an assessed value of $200,000 with a $50,000 homestead exemption would save about $27.
The district began laying off dozens of workers last week; 123 workers left in June after taking a buyout. Remaining workers will see additional cuts to their benefits.
The district was not surprised at the downgrade and said in a prepared statement that it will have little impact because it has "no plans to issue further debt in the foreseeable future and continues to place its credit worthiness and payment of existing debt as one of the agency's highest priorities."
Among the favorable factors cited Standard & Poors: "strong executive and legislative oversight of the budget, ...strong management practices and policies, strong reserves and low direct debt levels."
However, the bond rating agency said it would consider lowering the ratings further, if the district took on additional debt without a "significant increase in revenues authorized by the governor and Florida's legislature."
The district issued $546.1 million of the AAA-rated insured bonds in November 2006 to help jump-start construction of Everglades restoration projects. The district was the first government agency in the nation to use a type of bond called "certificates of participation" to pay for environmental restoration.
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