S&P changes outlook on Reedy Creek Improvement District’s GOs to stable

S&P Global Ratings on Friday revised the outlook on Reedy Creek Improvement District, Florida’s general obligation bonds to stable from developing.

S&P also affirmed the AA-minus long-term rating on the district’s outstanding GOs, saying the rating reflects the strong tax base, very strong collection rates and consistent financial performance.

“The outlook revision reflects recent state legislation that provides for the district’s continued ability to levy ad valorem taxes consistent with the security pledges at the respective bond issuances, while limiting operational changes that could affect timely debt service payment,” said S&P credit analyst Christian Richards.

Last month, the Florida Legislature passed a law that renamed the Reedy Creek Improvement District as the Central Florida Tourism Oversight District (CFTOD) and put its governmental control into the hands of Gov. Ron DeSantis and the state Legislature.

“The main point is that this is a change primarily in name only,” Ben Watkins, director of the state of Florida’s Bond Division, told The Bond Buyer last month. “There will be no impact on debt whatsoever. It will be the same entity, same security. There’s going to be no impact on outstanding debt.”

S&P said the outlook revision “results from the governor signing legislation on Feb. 27, 2023, that amended the Reedy Creek Improvement Act. The new law removes the risk of RCID dissolution on or after June 1, 2023, contained in previous legislation.”

The new law changes the board selection process, makes technical changes to the district’s zoning powers, along with the name change, although CFTOD may continue to operate under the RCID name for two years.

“As of the date of enactment, the Florida governor will now select, and the Florida Senate will confirm, five board members to serve staggered four-year terms. Previously, the landowners of RCID voted to select board members,” S&P noted.

The district spans about 25,000 acres and provides fire protection, road and bridge maintenance and emergency medical services as well as combined utility services. It encompasses the Walt Disney World Resort, the primary service recipient, which accounts for about 88% of the property tax base.

At the end of fiscal 2022, RCID had about $686 million in tax-secured debt and an additional $185 million in utility debt.

“Year-to-year performance is mixed on an audited basis due to planned capital expenditures funded with reserves, but the district generally outperforms its budget, leading to maintenance of very strong reserve,” Richards said. “We expect this to continue through the near term given the district’s predictable revenue and expenditure profiles.”

S&P said the district’s assets and liabilities, including outstanding bonds, and its operational responsibilities won’t be transferred to other local governments as had been feared by some after the original April 2022 legislation was passed, which required the reorganization or dissolution of RCID.

“We expect CFTOD will continue make timely debt service payments during the board transition, given the ability of the district to continue levying property taxes and pay bonded debt service,” S&P said.