City of Fernandina Beach
Press Release
Contact: Mary Hamburg
City Manager’s Office
February 28 2018 5:39 p.m.
Both the City of Fernandina Beach and the Fernandina Beach Utilities Department have improved their financial position in the recent Moody’s Investors Service City Rating. Currently, the water and sewer enterprise surpasses the national medians within its rating category relative to coverage and liquidity.
According to a press release issued by Moody’s, Fernandina Beach benefits from a healthy financial position due to the City’s prudent budgeting and adherence to formally-established fiscal policies, a moderately-sized and growing tax base, and low debt and pension burdens.
Please see the attached documents for additional information. Congratulations to Comptroller Patti Clifford and Utilities Director John Mandrick for their financial acumen.
A Portion of Moody’s Summary:
CREDIT OPINION
1 February 2018 Fernandina Beach (City of) FL
Update following assignment of issuer rating
Summary
Fernandina Beach benefits from a healthy financial position due to the city’s prudent budgeting and adherence to formally-established fiscal policies, a moderately-sized and growing tax base, and low debt and pension burdens. While tourism remains a sizeable component of the city’s economy, its location on the Atlantic coast is vulnerable to weatherrelated events.
Hurricane Matthew significantly damaged the city’s marina in October 2016, and efforts to rebuild have been slowed because of delays in FEMA reimbursements ($430 thousand has been received thus far). The city wrote down the value of the marina’s assets by approximately $4 million in fiscal 2017, and has spent approximately $110 thousand in repairs. The city plans additional marina-related capital improvements in 2018.
Damage to the rest of the city from both hurricanes Matthew and Irma was minimal relative to the budget, totaling approximately $1.3 million in debris removal, and the water and sewer utility was not impacted.
The update follows the assignment of an initial issuer rating of Aa3 on January 31, 2018. The issuer rating is equivalent to a rating for a hypothetical General Obligation Unlimited Tax (GOULT) debt issue, and is used as a reference rating for the city’s water and sewer utility rating
A portion of Moody’s Report follows:
History of stable reserves and liquidity
Fiscal 2012-2016
Credit strengths
» Healthy and stable financial position supported by formal fund balance policies
» Low debt burden with limited future borrowing plans
» Near-term growth due to redevelopment and business expansion
Credit challenges
» Historical reliance of enterprise funds (marina and golf course) on transfers from the general fund
» Coastal location on the Atlantic Ocean susceptible to weather-related events
» Significant taxpayer concentration
Rating outlook
Outlooks are not usually assigned to local government issuers with this amount of debt outstanding.
Factors that could lead to an upgrade
» Substantial tax base expansion
» Diversification of tax base
» Material increases in financial reserves and liquidity
Factors that could lead to a downgrade
» Trend of operating deficits resulting in reserve declines
» Contraction of local economic activity
» Significant declines in the tax base or deterioration of the demographic profile
» Material increase in the debt burden
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Additional Moody Information:
RATINGS RATIONALE The Aa3 issuer rating reflects our assessment of the city’s implicit general obligation credit strength; no rated debt is currently outstanding with this security. The rating incorporates the city’s moderately-sized and concentrated tax base that is experiencing growth, a healthy financial position supported by formal fiscal policies, average wealth and income levels, low debt burden, and manageable pension liabilities. Fernandina Beach’s issuer rating is used as an input for a rating assigned using the US Municipal Utility Revenue Debt, published in October 2017. Under this methodology, ratings on individual debt securities are typically banded within two notches by reference to an issuer or GO rating. These references to the issuer rating highlight the relationship between a government’s various debt securities. In this case, Fernandina Beach’s issuer rating of Aa3 is one-notch from the city’s water and sewer enterprise rating of A1.
Moody’s Utilities Rating Summary
RATINGS RATIONALE The upgrade to A1 reflects the utility’s solid financial position and liquidity supported by annual rate increases, strong annual debt service coverage, and sufficient capacity. The rating also incorporates the system’s small, tourism-focused service area, elevated debt burden, and adequate legal provisions. RATING OUTLOOK Outlooks are not usually assigned to local government issuers with this amount of debt outstanding. FACTORS THAT COULD LEAD TO AN UPGRADE Significant expansion of the system’s service area Declines in debt ratio FACTORS THAT COULD LEAD TO A DOWNGRADE Deterioration of debt service coverage levels and/or liquidity Increased debt ratio LEGAL SECURITY Net revenues of the city’s water and sewer system. USE OF PROCEEDS Not applicable. PROFILE The system provides water and wastewater services to the City of Fernandina Beach’s (issuer rating Aa3) corporate limits, as well as some adjacent properties in unincorporated Nassau County (issuer rating Aa2). As of fiscal 2016, there were 8,928 water and 9,592 wastewater accounts. METHODOLOGY The principal methodology used in this rating was US Municipal Utility Revenue Debt published in October 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.