OREANDA-NEWS. October 07, 2015.  Fitch Ratings has assigned an 'A-' rating to the following bonds to be issued by the city of Hollywood, Florida Community Redevelopment Agency (the CRA):

--\\$46,395,000 redevelopment revenue and revenue refunding bonds (Beach CRA) series 2015.

The bonds will be sold via negotiation on or about October 15th. New money bonds in the principal amount of \\$12.55 million will finance certain utilities, parking, and streetscape improvements in the CRA's Beach Redevelopment Area. Proceeds of the remaining bonds will refund, on a current basis, all of the CRA's outstanding redevelopment revenue bonds (Beach CRA) series 2004; and refund, on an advance basis, all of the CRA's outstanding redevelopment revenue bonds (Beach CRA) series 2007. The refunding bonds are projected to achieve level debt service savings with an aggregate net present value of \\$2.69 million or 7.2% of refunded par.

Fitch has also affirmed the 'A-' rating on \\$37.4 million of outstanding redevelopment revenue bonds (Beach CRA) series 2004 and 2007 (pre-refunding).

The Rating Outlook is Stable.

SECURITY

The redevelopment revenue bonds are limited obligations of the CRA payable from certain ad valorem tax revenue paid by the city of Hollywood, Broward County, the South Broward Hospital District (through Jan. 1, 2018 subject to an annual cap of \\$300,000) and the Children's Services Council of Broward County (collectively, the taxing units) to a trust fund established by city ordinance for the benefit of the Beach Redevelopment Area. The amount of ad valorem tax revenue paid by the taxing units shall equal 95% of the amount of ad valorem taxes levied less the amount of ad valorem taxes which would have been produced by the then current millage rate applied to the taxable assessed value (TAV) of the Beach Redevelopment Area as of Jan. 1, 1997.

KEY RATING DRIVERS

STRONG PLEDGED REVENUE COVERAGE: Projected pledged tax increment revenue for fiscal year 2016 will cover maximum annual debt service (MADS) following issuance by a strong 4.1 times (x). Existing revenues provide good protection against various tax base stresses including the loss of the top ten taxpayers and declines in TAV more than 3x the worst single-year historical loss.

SMALL PROJECT AREA: The limited nature of the pledge to bondholders combined with the small size and coastal location of the project area heighten risk to unexpected events and restrict upward movement in the rating.

RISK TO COVERAGE DILUTION: The additional bonds test (ABT) provides adequate protection to bondholders against additional leverage stipulating a minimum of 1.5x MADS coverage as a condition precedent to parity indebtedness.

MANAGABLE CAPITAL DEMANDS: Fitch believes the CRA has the capacity to fund its 5-year capital improvement program for the Beach Redevelopment Area from a combination of existing reserves, annual surplus tax increment revenue, or additional debt in a manner that would not diminish credit quality in a meaningful way.

RATING SENSITIVITIES

DEBT SERVICE COVERAGE: The rating is sensitive to shifts in the level of debt service coverage resulting from changes in the TAV of the Beach Redevelopment Area, the issuance of additional parity indebtedness, or changes in certain financing or other local agreements governing the availability of pledged revenue to bondholders.

CREDIT PROFILE

The CRA was created in 1979 by the City of Hollywood (GO bonds rated 'A' with a Positive Outlook) for the purpose of redeveloping blighted areas within the meaning of the Florida Community Redevelopment Act. The CRA is a component unit of the city; its board members are the same as the City Commission.

ESTABLISHED REDEVELOPMENT AREA CENTERED ON TOURISM

The Beach Redevelopment Area was established in 1997 and extends from the city's beach area between Sherman Street and the southern property line of the Diplomat Hotel and the related convention center, and between the Intracoastal Waterway and the Atlantic Ocean. It encompasses a relatively small 293 acres or less than 2% of the city's total land area, but a more significant 22% of the city's overall TAV. The small geographic size of the redevelopment area is a the primary limiting rating factor as it creates a higher level of risk to an unpredictable change in profile of the properties from which pledged tax increment revenue are derived, even if short lived.

The Beach Redevelopment Area is comprised of more than 7,100 parcels including roughly 6,000 condominiums units and 450 hotel/motel properties. The redevelopment area's favorable position in the South Florida economy and close proximity to Miami Beach (25 miles), Fort Lauderdale (10 miles) and Boca Raton (28 miles) support expectations for long-term retention of property value. Historical growth has been exceptionally strong - TAV in the Beach Redevelopment Area has increased at a CAGR of 9.2% from a base year value of \\$545.9 million to \\$2.67 billion in fiscal year 2016. Fitch would expect TAV growth to moderate over time given limitations on developable area, but near-term prospects are good reflecting current trends in the Hollywood market and the approaching openings of the \\$175 million 349-room Margaritaville Hollywood Beach Resort and \\$180 million 304-unit Costa Hollywood Condo Resort Hotel (the CRA is estimating a TAV of \\$150 million for each property).

STRONG COVERAGE AND REVENUE RESILIENCY

Budgeted fiscal year 2015 pledged tax increment revenue totals \\$22.5 million, providing 3.7x coverage of estimated MADS of \\$6.7 million following the proposed bond sale. MADS coverage would improve to 4.1x based on the certified TAV for fiscal year 2016 (assuming no change in millage rates). The Beach Redevelopment Area's maturity level (measured by the ratio of incremental to base year value) leads to an only moderate level of revenue volatility - for example, a 1% decline in TAV would yield only a 1.2% decline in tax increment revenue (assuming no change in millage rates).

Redevelopment area maturity and the strength of existing MADS coverage provides bondholders' with considerable protection against cyclical or event driven declines in TAV and tax increment revenue. Fitch estimates TAV could fall by 60% before the resultant tax increment revenue would fail to cover MADS by at least 1x. The largest single-year decline in TAV in the Beach Redevelopment Area was a 17.2% loss in fiscal year 2010. Fitch also estimates the loss of the redevelopment areas' top 10 taxpayers with coverage remaining strong at 3.1x MADS. The top 10 taxpayers account for a moderately high 24.9% of incremental value, mostly represented by the presence of the Diplomat Hotel.

LEVERAGING RISK VIEWED AS MODERATE

Fitch considers the additional bonds test adequate, requiring pledged revenue received within any consecutive 12 months of the last 18 months to cover MADS by at least 1.5x. The CRA's five-year capital improvement plan (CIP) outlines \\$70.7 million in projects, including the projects to be funded with proceeds of the current sale. The CIP does not identify funding sources for the remainder of the CIP, but CRA officials indicated there are no current plans for additional debt. The CRA appears adequately positioned to fund the remainder of its CIP on a pay-go basis. In fiscal year 2015 the Beach Redevelopment Area will generate approximately \\$5 million of surplus after covering all operating and debt expenses, and it reported \\$22.9 million of unrestricted cash and investments at the end of fiscal year 2014. Fitch estimates the CRA could debt finance the entirety of the Beach Redevelopment Area's CIP with the resulting coverage of MADS remaining satisfactory at 2.45x.

AMENDMENTS TO LEGAL PROVISIONS CONTEMPLATED

The city and the CRA are exploring an amendment to the resolution establishing the trust fund for the Beach Redevelopment Area that could result in a reduction in the amount of tax increment revenue deposited therein and pledged to bondholders. Any such amendment would require the prior written consent of the county. The amendment would provide additional funds for the city for budgetary or tax relief or capital projects outside the Beach Redevelopment Area.

In conjunction with the current offering the city and CRA will enter into an interlocal agreement pursuant to which the city will agree to pledge specific non-ad valorem revenues as additional security for the bonds in the event the city or CRA take any action that would cause an impairment of contract under the bond resolution (including any action or inaction resulting in a reduction in MADS coverage below 2.0x). Any such pledge of non-ad valorem revenue is subject to prior rating agency review and rating affirmation. If the pledge of designated revenue is insufficient to obtain a rating affirmation the city has agreed to adopt a resolution covenanting to budget and appropriate (CBA) sufficient non-ad valorem revenue equal to any debt service funding deficiency.

Any amendment to the pledge of revenue providing bondholder security will be considered by Fitch at the time of the adoption of a designated revenue resolution, CBA resolution, and other interlocal agreements, as the case may be.