OREANDA-NEWS. Fitch Ratings has affirmed the following Collier County, Florida (the county) bond ratings:

--$226 million special obligation revenue bonds at 'AA';
--$38.7 million gas tax revenue bonds at 'AA-';
--Implied general obligations (GOs) at 'AA+';

The Rating Outlook is Stable.

SECURITY

Special obligation revenue bonds are supported by the county's covenant to budget and appropriate (CB&A), by amendment if necessary, from non-ad valorem revenues (NAV) amounts sufficient to pay debt service. Such a covenant shall be cumulative to the extent not paid, and shall continue until such NAV or other legally available funds in amounts sufficient to make all such required payments shall have been budgeted, appropriated, and actually paid.

Gas tax bonds are payable from a lien on and pledge of gas tax revenues collected on both a statewide(via a population based formula) and local basis (via a transportation expenditures formula), including revenues from the constitutional fuel tax, the county fuel tax, the ninth cent gas tax, and the six cent and five cent local option gas taxes.
KEY RATING DRIVERS

SOLID FINANCIAL MANAGEMENT: The county has actively managed expenditure growth and retains much budgetary flexibility, including adequate reserve levels.

POSITIVE ECONOMIC INDICATORS: Recent economic indicators such as employment, housing values and housing starts show recovery. Fitch expects sound long term population and economic growth, based on the county's very affluent tax base and recognition as a leading destination for tourism and leisure activity on Florida's Gulf Coast.

MANAGEABLE DEBT POSITION: The debt burden and future capital needs are manageable, as are the county's pension and other postemployment benefits (OPEB) liabilities.

BROAD AND DIVERSE REVENUE BASE: The county's NAV revenues represent a wide range of varied revenues including sales taxes, service charges, and payments in lieu of taxes from the utility system. Available NAV revenues are ample relative to CB&A debt service obligations.

COVENANT DEBT NOTCHING: A one notch distinction in the rating on the special obligation revenue bonds from the implied unlimited tax GO rating reflects the absence of a pledge of specific revenue and inability to compel an increase of revenues to pay bondholders.

NARROW GAS TAX COVERAGE: Fiscal 2015 gas tax receipts cover annual debt service by a narrow 1.49x. , although revenue collections are generally very stable and saw a 5.3% increase in fiscal 2015.

RATING SENSITIVITIES

DETERIORATION OF RESERVE BALANCES: Deficit operations leading to a significant contraction of reserve balances could result in negative rating action.

INCREASED GAS TAX COVERAGE: Continued improvement of gas tax revenues, absent further leveraging, that increases coverage could result in positive rating action.

CREDIT PROFILE

Collier County is located in southwestern Florida, encompassing part of the Everglades National Park. The county has an estimated 2014 population of 348,777 and includes the city of Naples, a popular destination for affluent tourists and second homeowners.

FINANCIAL RESULTS

Unaudited fiscal 2015 results show a $2 million draw on fund balance, which is better than budget. Fitch attributes the better than expected results to conservative budgeting; the county builds a contingency into its budgets, has strong control of position vacancies and enacts midyear budget cuts as needed to maintain targeted liquidity. The year-end unrestricted general fund balance was $56.3 million (17.3% of spending).

The fiscal 2016 general fund budget is a 5.5% increase over the 2015 budget. The millage rate is unchanged but 8.5% tax-base growth in fiscal 2016 enables revenue growth. Additional revenue expansion is expected in sales tax and state shared revenues reflecting the strengthening of both the local and statewide economy. The county annually budgets a portion of fund balance to balance the budget, but conservative budgeting practices (the state requires budgeting a 5% offset to revenues) as well as strong expenditure controls enable the county to maintain stable finances. The county does sizable pay-as-you-go financing of capital projects through the general fund, with $30.4 million budgeted for fiscal 2016, which represents another measure of financial flexibility.

TAX BASE SHOWING CONTINUED GROWTH

Countywide taxable values stabilized in fiscal 2013 with 0.5% growth, and have grown at an increasing rate in each subsequent year. New construction permits are up 31.5% in fiscal 2016 over the same time in fiscal 2015 signaling future growth. The state estimate for fiscal 2017 taxable value is a strong 7% increase over fiscal 2016. The low operating tax rate of 3.56 mills has remained constant since 2010 and is well under the 10-mil cap.

BROAD REVENUE BASE AVAILABLE FOR CB&A DEBT SERVICE

Legally available NAV revenues are diverse and provide solid coverage of combined CB&A maximum annual debt service (MADS), even when essential service expenditures are taken into account. A 1.5x MADS anti-dilution test for all bonds payable from NAV revenues guards against over issuance but further leveraging is also inhibited by the county's need of these revenues for operations.

The largest component of NAV revenues, the half-cent sales tax, grew by 11.3% in fiscal 2014 and 7.8% in fiscal 2015. Year-to-date revenues are up 6.7% in fiscal 2016. Service charges and impact fees are also important components of the county's NAV revenue base.

NARROW BUT IMPROVING GAS-TAX COVERAGE

Gas-tax revenue coverage is improving, as the historical decline in gas tax receipts reversed with a 1.8% increase in fiscal 2014 and a 5.3% increase in fiscal 2015. Fiscal 2015 collections provided 1.49x annual debt service and 1.44x maximum annual debt service. From fiscal 2007 to 2013, gas tax revenues fell 7% in aggregate; the single largest year-over-year decline was 3.8% in 2008. Fiscal 2016's first four months of collections are up 3.5%. Continued improvement could affect credit quality. The 1.35x additional bonds test is lenient although future leveraging would require sustained revenue growth.

FAVORABLE LONG-TERM SOCIOECONOMIC PROSPECTS

The tax base is predominantly residential and very affluent. Market value per capita is in excess of $198,000 and per capita income is 33% and 44% higher than U.S. and Florida averages, respectively. Economic activity centers on leisure and hospitality and retail trade, resulting in a good deal of seasonal unemployment.

Unemployment as of December 2015 has decreased year-over-year to a low 4.4%, which is lower than the state and national averages of 4.8%.

MANAGEABLE DEBT POSITION

Overall debt remains below average at 1.1% of market value and payout is average at 62.4% retired in 10 years. The 2016 five-year CIP includes $613 million of project costs, with $300 million of the planned projects for the water and sewer utility. The bulk of the general government projects are for road works with related funding from excess gas tax revenues, transportation impact fees and general fund pay-as-you-go. No new debt is contemplated through fiscal 2017. The county's pension liability is limited to its participation in the statewide plan (FRS). The county's required contribution, including the sheriff's office, totaled $22.8 million (5.2% of governmental spending) in fiscal 2014. The county provides OPEB through an implied subsidy (as required by Florida law) in addition to an explicit subsidy to a very small closed group of retirees. The county funds its OPEB obligation on a pay-as-you-go basis, $816,000 (a minimal 0.2% of spending). The OPEB UAAL is a low $14.2 million, including the sheriff's office. Total fiscal 2014 carrying costs (debt service, pension and OPEB) were a low 12.8% of government spending.