Agenda - Council Work Session - 05/28/2013

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tC atings FITCH RATES BREVARD COUNTY, FL SPACE COAST INFRASTRUCTURE AGENCY INFRA IMPRVMNT REVS 'A' Fitch Ratings -New York-31 July 2012: Fitch Ratings assigns an 'A' rating to approximately $38.7 million in Space Coast Infrastructure Agency (the Agency) Infrastructure Improvement Revenue Bonds (I-95 Brevard County DBF Project), Series 2012. The Outlook on the bonds is stable. The bonds are expected to close on August 15th and the proceeds will be used to finance a portion of costs of the Florida Department of Transportation's (FDOT) approximately 29 mile widening of I-95 from four lanes to six lanes in Brevard and Volusia Counties (the project). KEY RATING DRIVERS SOLID ABILITY & WILLINGNESS OF FDOT TO MEET OBLIGATIONS: Bond payments are derived from statutorily authorized payments to be made by the Florida Department of Transportation (FDOT), subject to appropriation, pursuant to a design build finance (DBF) contract. Pursuant to section 334.30 of Florida Statutes, FDOT can enter into DBF contracts and other public private partnerships for projects included in FDOT's work program. Payments by FDOT can be made over time, as long as obligations for such payments in total do not exceed 15% of total federal and state funding for the State Transportation Trust Fund (STTF). Fitch views the credit quality of the statutorily authorized payments to be made by FDOT pursuant to the DBF contract as 'A.' This rating will drive the rating on the bonds. Failure of FDOT to appropriate during the principal repayment period or failure to include the project in future work programs would lead to a payment default. STRUCTURED ARRANGEMENT LIMITS COMPLETION RISK: The bonds are structured similar to a receivable financing, with the bondholder isolated from the risk of the contractor failing to perform. The bonds are structured to have 1.0 times (x) coverage. Bond proceeds are only drawn down for FDOT approved work, ensuring that at any time the combination of bond proceeds, contract payments due from FDOT for approved work and structured liquidity is equal to the par amount of the bonds. A termination of the DBF contract and certain other events would lead to a mandatory tender of the bonds but there is no premium should these occur, meaning that available resources should always be sum sufficient to cover debt service. INTERESTS OF FDOT & CONTRACTOR ALIGNED: While the structure of the transaction isolates the bondholder from completion risk, the statutes that allow FDOT to enter into DBF contracts and FDOT's construction risk mitigation procedures indicate that the interests of all parties are aligned. The DBF approach allows for project acceleration without a short-term impact to FDOT's cash outlay. In addition, this particular financing structure includes a waiver of offsets by FDOT once work has been approved, minimizing leverage on the DBF contractor's balance sheet. In conjunction with these benefits, FDOT does require a surety bond sized to 100% of the contract price and will only be required to pay for work approved. In addition, FDOT runs an annual qualification process for contractors and surety providers, and also has clearly defined contractual arrangements. While bondholders are not exposed to contract frustration or contract default, the proper alignment of interests between FDOT and the DBF contractor provides comfort. WHAT COULD TRIGGER A RATING ACTION --Change in the credit quality of FDOT's Statutorily Authorized Obligations. SECURITY The bonds are secured by FDOT Contract payments and all funds held by the Trustee pursuant to the indenture, including the Project Fund and the Bond Fund, which includes the reserve account