NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the 'A+' rating on approximately $29.3 million of State of Florida Board of Governors and Florida Board of Education parking facility revenue bonds on behalf of University of South Florida (USF).
The Rating Outlook is Stable.
SECURITY:
Parking revenue bonds are secured by and payable from pledged net revenues derived from student transportation access fees assessed to all USF students and operation of USF's parking system.
KEY RATING DRIVERS:
PARKING SYSTEM OPERATIONS: The rating affirmation reflects the consistently solid operating performance of USF's parking system, fueled by a universal fee assessed to all students enrolled at USF's growing campuses and strong parking system utilization, all of which support acceptable coverage of parking revenue bond debt service.
HIGH DEBT BURDEN WITH ADEQUATE COVERAGE: The parking system's debt burden at 26% of operating revenue is high but typical of auxiliary systems and is afforded adequate debt service coverage (DSC) of 1.57x by pledged revenues.
UNIVERSITY IN TRANSITION: USF's financial profile has generally been characterized by positive operating margins, a diverse revenue base and growth in balance sheet resources. The university's financial profile will be changing as a result of the creation of a separate institution, Florida Polytechnic University (FPU), that was previously part of USF. These changes will be evident with fiscal 2013 results.
RATING SENSITIVITIES:
ADDITIONAL DEBT: The parking system may undertake new debt to meet demand for additional parking facilities which Fitch expects to be accompanied by resources sufficient to service the debt, the lack of which could negatively pressure the rating.
SUCCESSFUL TRANSITION: An inability to generate results in a manner consistent with its historical performance, after accounting for FPU's transition, may indicate near-term fiscal stress for USF and pressure the auxiliary system's ratings.
CREDIT PROFILE:
USF primarily serves residents in greater Tampa Bay and St. Petersburg and is one of the 12 institutions of public higher education in the State University System of Florida (revenue bonds rated 'AA' by Fitch). Fall 2012 headcount enrollment was 47,801 up from 47,362 in fall of 2011. The majority of students are located at USF's main campus in Tampa, Florida. The parking system for the Tampa campus included 20,554 vehicle spaces as of fall 2012.
Fiscal 2012 operating margins were negative 2.7% due to state funding decline but were made up somewhat with tuition and fee increases. USF expects increases in state funding for the coming year. Available funds of $382 million for fiscal 2012 covered 34.7% of operating expenses and 93.3% of long-term debt. USF debt also consists of certificates of participation in the amount of $321 million (not included in the available funds to long-term debt calculation). USF transferred assets and associated liabilities to FPU as part of the spin-off and expects to show the effect of those transfers in the fiscal 2013 audit. Fitch expects that USF will be able to absorb the loss of assets without significant detriment to its credit profile.
FPU was formed as a separate state institution from USF's Polytechnic campus (USFP) in calendar 2012. Assets from USF related to FPU's operations have been transferred and management will work with the new institution to ensure a smooth transition and teach-out for former students of USFP. The effect on USF's balance sheet and operational revenue will be evident in fiscal 2013 results. The expected impact to USF is approximately $85 million comprising capital asset and cash transfers to FPU. Fitch expects that current volatility due to the transfer of assets will settle in the first few years of FPU operating as an independent state institution.
PARKING SYSTEM OPERATIONS
The parking system operating margin for fiscal 2012 equaled 10.8%, down from fiscal 2011 (21.9%) the results of which included a one-time concurrency payment from the city of Tampa for the campus bus shuttle program. Parking system revenues are derived primarily from sales and services of the parking system, including a mandatory transportation access fee assessed to all USF students (22.2% of fiscal 2012 operating revenues), decal sales, citation collections and vending permit collections (77.7%). Fitch acknowledges that nearly full reliance on sales and service revenues for the system is typical for most auxiliary enterprise systems.
For fiscal 2012, legally pledged revenues totaled $5.6 million, resulting in DSC of an acceptable 1.57x. DSC on an economic basis, using net parking system revenue is 1.3x, similar to 2011 not including the non-recurring city of Tampa concurrency payment. USF has attempted to maintain lower costs for its students by not increasing the per credit hour transportation access fee of $3/hour since fiscal 2010. Maximum annual debt service (MADS) for the system remains high at approximately $3.6 million but is typical of auxiliary enterprises and somewhat tempered by consistent coverage and supported by a growing enrollment base at the university.
The system's liquidity levels were slightly improved in fiscal 2012 and remain adequate for the rating level. Available funds, defined as cash and investments not permanently restricted, totaled $7.38 million, representing 61.1% of operating expenses and 23.6% of outstanding debt. Most of the auxiliary system's ongoing capital needs such as maintenance and rehabilitation of existing facilities are funded with internal reserves. The parking system is considering potential new debt issuance over the next two years to fund new construction and to meet the parking demand of its largely commuter population. USF expects to measure the effect of new debt on student costs and defer the issuance of that debt if it increases costs materially.
Additional information is available at 'www.fitchratings.com'
Applicable Criteria and Related Research:
'Revenue-Supported Rating Criteria' (June 6, 2013);
'U.S. College and University Rating Criteria' (May 10, 2013).
'Fitch Affirms University of South Florida's Parking Revs at 'A+'; Outlook Stable' (July 26, 2011).
Applicable Criteria and Related Research:
U.S. College and University Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708049
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709499
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=796286
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