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Rating Action:

Moody's assigns A1 rating and stable outlook to City of Tampa's (FL) Refunding and Capital Improvement Cigarette Tax Allocation Bonds (H. Lee Moffitt Cancer Center Project) Series 2012A

22 Aug 2012

Rating applies to approximately $126 million in Series 2012A bonds

New York, August 22, 2012 --

Moody's Rating

Issue: Refunding and Capital Improvement Cigarette Tax Allocation Bonds, Series 2012A; Rating: A1; Sale Amount: $126,000,000; Expected Sale Date: 8/21/2012; Rating Description: Special Tax: Non-Sales/Non-Transportation

Opinion

Moody's has assigned an A1 rating to the City of Tampa's $126 million Refunding and Capital Improvement Cigarette Tax Allocation Bonds (H. Lee Moffitt Cancer Center Project), Series 2012A. Approximately $117 million of the bond proceeds will be used for the acquisition, construction, and equipping of facilities at the H. Lee Moffitt Cancer Center and Research Institute (Institute) located in Tampa. The remaining proceeds will be used to refund approximately $19 million in outstanding Cigarette Tax Allocation Bonds Series 2002A and B, issued through the Hillsborough County Industrial Development Authority. The bonds are expected to be sold the week of September 3.

SUMMARY RATINGS RATIONALE

The bonds are secured by an allocation of the State of Florida's cigarette tax revenues, protected by a dollar floor amount defined in state statute. The A1 rating reflects the statutory minimum floor on pledged revenues; ample cushion for debt service, provided by cigarette tax revenues net of the amounts pledged to the bonds and other allocations; a history of legislative support for the cancer center as underscored by statutory amendments to accommodate the new offering; the statutory continuing appropriation for the pledged revenues; relatively weak legal provisions including a 1.05 times additional bonds test (ABT) and lack of debt service reserve; and a the overall vulnerability of the revenue source to declining consumption patterns and the shock of rate increases, especially given the 20 year repayment schedule for the bonds. The A1 rating level also incorporates the assumption that cigarette tax revenues will continue a modest, steady decline of under 1% annually and lack of future legislative actions that would further leverage the cigarette tax revenues and potentially reduce the cushion available for debt service on the Series 2012A bonds.

STRENGTHS:

- Pledged revenues protected by floor amount identified in state statute

- Ample cushion for debt service, provided by cigarette tax revenues net of the amounts pledged to the bonds and identified in statute for other allocations

- History of legislative support for the Institute's capital projects

- Continuing appropriation of funds, eliminating need for annual appropriation

CHALLENGES:

- Vulnerability of pledged revenues to declining smoking patterns, future rate increases, tax avoidance, regulatory risk, and other potential industry changes that result in fundamental shifts downward in consumption and thus cigarette tax collections

- Long (20 year) maturity on bonds

- Modest projected 1.05 times coverage of debt service by the pledged revenue floor

- Lack of debt service reserve

- Weak ABT (1.05 times)

- Ability of state to pledge cigarette tax revenues for other purposes, diluting cushion available to these bonds

Outlook

The outlook for the Cigarette Tax Allocation Bonds, Series 2012A is stable. Although the bonds' claim to state cigarette tax revenues is shared with other obligations, none of them have a minimum floor specified in statute. In addition, significant funds remain, even after these additional obligations have been satisfied, to provide strong coverage. As a result, coverage levels are expected to remain sufficient, even if revenues decrease over the term of the bonds.

WHAT COULD MAKE THE RATING GO UP?

- Additional pledged revenues combined with higher additional bonds test

- Legal constraints on further allocations of cigarette tax collections

WHAT COULD MAKE THE RATING GO DOWN?

- Significant revenue decline similar to the drop following the 2010 rate increase

- Legislative action to further leverage cigarette tax revenues, resulting in reduced cushion for debt service coverage

- Regulatory or industry changes that negatively impact smoking patterns and lead to annual declines greater than 5%

The principal methodology used in this rating was US Public Finance Special Tax Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

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Nicole Johnson
Senior Vice President
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Emily Raimes
VP - Senior Credit Officer
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns A1 rating and stable outlook to City of Tampa's (FL) Refunding and Capital Improvement Cigarette Tax Allocation Bonds (H. Lee Moffitt Cancer Center Project) Series 2012A
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