Correction: Fitch Rates Gulf County, Florida's $14.3MM Gas Tax Rev Rfdg Bonds 'A-' Underlying

This is an amendment to a message issued on August 21, 2006. It corrects the dollar amount in the headline and information in the first and last paragraphs.

Fitch Ratings assigns an underlying 'A-' rating to Gulf County, FL's $16.3 million gas tax revenue refunding bonds, series 2006. This is the first rating assigned to Gulf County by Fitch. The bonds, expected to be insured by an 'AAA' rated bond insurer, are scheduled to sell on August 30 through negotiation with Morgan Keegan & Company, Inc. Proceeds from the series 2006 bonds will be will be used to refund $4.7 million in outstanding gas tax revenue bonds, series 1995 and series 2001, and to provide approximately $9.6 million in new money needed to fund road and transportation needs throughout the county. The Rating Outlook is Stable.

The 'A-' rating on the county's gas tax revenue bonds is based on the relatively stable nature of the pledged revenue stream, adequate coverage of maximum annual debt service (MADS) by pledged revenues, and solid legal provisions. The rating also considers the county's general credit characteristics, including a moderate debt burden with limited future borrowing plans; sound general fund reserve levels; and a limited economy with below-average wealth indicators. Although debt ratios and general fund balance levels are consistent with this rating category, Fitch notes the absence of any formal policies governing the county's debt affordability and financial management.

The gas tax revenue bonds are secured by three different gas taxes: the constitutional fuel tax, the county fuel tax, and the six-cent local option gas tax. While fuel tax revenues are prone to some fluctuation relative to economic factors and the price of fuel, the essential nature of the commodity in large part mitigates this concern. The diversity of the pledged revenue adds additional strength.

Although municipalities are entitled to a portion of revenue derived from the six-cent local option gas tax, the county's only two incorporated municipalities, Port St. Joe and Wewahitchka, have waived their right pursuant to an interlocal agreement that expires upon maturity of the series 2006 bonds. In exchange, the county has agreed to provide funding for the improvement and maintenance of certain roads throughout both municipalities.

Debt service coverage is adequate at 1.4 times (x) MADS by fiscal 2005 pledged revenues and the additional bonds test requires a solid 1.4x coverage of MADS for the issuance of parity obligations. The county gas tax and constitutional fuel tax are one-cent and two-cent state taxes, respectively, which are distributed to counties based on a formula composed of three factors: land area, population, and locally generated revenues. The six-cent gas tax is locally imposed and is due to expire in 2031. Pledged revenue has grown at the annual average rate of 2.8% over the last nine years, including a strong 7% increase in fiscal 2005. The county has no plans to further leverage the gas taxes.

Gulf County is located in northwest Florida along the Gulf of Mexico. With an area of 557 square miles and a 2005 estimated population of 13,975, the county is a small and historically rural county. The county's population grew by a moderate 16% in the 1990s and by an additional 5% since the 2000 census. With a relatively small labor force, the county's economy is focused on timber and agricultural industries and is anchored by a state prison that employs over 600 people. The county's unemployment rate has moderated in recent years after climbing to 14% in 1999 following the departure of one of its largest employers. The unemployment rate declined in 2005 for the third consecutive year to a low 3.9%, better than the state and the nation. Income levels lag state and national averages, and well below-average per capital retail sales levels illustrate the lack of commercial development within the county.

The county's financial position is sound. Surplus operations driven by strong growth in property tax revenue in fiscal 2005 led to an unreserved, undesignated general fund balance equal to a solid 22.6% of spending and transfers out. The county's low property tax rates and rapidly increasing property values further enhance the county's financial flexibility. Debt levels are currently low at $1,443 per capita and 0.76% as a percentage of taxable assessed value and should remain low given the county's limited general government borrowing plans. The fiscal 2007-2011 capital plan totals $62 million, with almost 45% devoted to maintenance of the county's water and wastewater utility system. Approximately 25% of the plan will address the county's road and transportation needs and the remainder of the plan will finance general government needs, including parks and recreation and facilities. Funding for a significant portion of the CIP relies on grants not yet secured.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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