Moody's upgrades Florida special tax, Garvee bonds

Moody's Ratings upgraded about $900 million of various Florida special tax debt as well as its Garvee bonds Tuesday stemming in part from the application of the agency's new U.S. states and territories rating methodology.

The rating agency upgraded $317.5 million of lottery revenue bonds to Aa1 from Aa3 issued through the Florida State Board of Education.

Moody's raised $305.5 million of Everglades Restoration and Florida Forever documentary stamp tax revenue bonds to Aa2 from Aa3, issued by the Florida Department of Environmental Protection.

The agency boosted $96 million of Seaport Investment program title fee revenue bonds to Aa1 from Aa3, issued by the Florida Department of Transportation.

Moody's lifted $172.8 million of federal grant anticipation revenue bonds (Garvees) to Aa3 from A1, issued by the Florida Department of Transportation.

The lottery revenue bond upgrade to Aa1 was due to the "parental support" of Florida government, which Moody's rates Aaa. It incorporates the narrow nature of the pledged lottery revenues transferred to the state Educational Enhancement Trust Fund. A maximum annual debt service coverage that reached over 20 times in fiscal 2024, is also considered. The additional bonds test is strong, Moody's said.

Moody's said the upgrade to the Everglades bonds to Aa2 incorporated state's credit quality as parental support and the narrow and somewhat volatile nature of the documentary stamp tax revenue pledge. The maximum annual debt service coverage reached 34 times in fiscal 2024. The bonds have a strong additional bonds test.

The Everglades bonds have a parity claim on 100% of documentary stamp tax collections, which are collected with the transfer of real estate, bonds and debt evidenced by notes and mortgages.

Moody's said its upgrade of the Seaport bonds to Aa1 was in part due to the state's credit quality, calling it "parental support," which mitigates the potential volatility of the pledged revenue. The MADS coverage reached 26 times in fiscal 2024, though the state could authorize further debt based on the pledged revenue.

The Seaport bonds are payable from motor vehicle title fees.

Moody's said its upgrade of the state's Garvees to Aa3 stems from its expectation debt service coverage by pledged federal highway and grant remaining strong. "The rating balances the strong coverage and parental support with certain credit challenges related to Garvee bonds, including the short duration of federal highway funding reauthorizations and the possibility that funding for bond repayment could be disrupted or reduced."

The Garvees are payable from Federal Highway Administration reimbursements to the state's Department of Transportation for construction costs.

The ratings carry stable outlooks, which "reflects the expectation that strong fiscal management will continue through economic cycles and administrations, including maintenance of high reserves and below-median liabilities."

The Florida Division of Bond Finance didn't immediately respond to a request for comment.