Florida sold $131.9 million of bonds Wednesday with double-barreled backing from the state's fuel taxes and full faith and credit pledge.
The Florida Department of Transportation sold right-of-way acquisition and bridge construction bonds, Series 2025A, to Baird, with 5s of 7/2025 at 2.80%, 5s of 2030 at 2.92%, 5s of 2035 at 3.19%, 4s of 2040 at 3.82%, 4s of 2045 at 4.07%, 4s of 2050 at 4.16% and 4.125s of 2054 at 4.20%, callable 7/1/2034.
The bonds have serial maturities from July 2025 to July 2055.
The bonds, to fund Department of Transportation right-of-way acquisition and bridge construction, are rated triple-A across the board by Moody's Ratings, S&P Global Ratings and Fitch Ratings, based on the state's full faith pledge.
"The deal should get a great reception as it's double barreled and with AAA ratings," said John Mousseau, president and chief executive officer at Cumberland Advisors.
Ben Watkins, director of Florida Division of Bond Finance, said there were many reasons to own the bonds with the first being the triple-A rating from three ratings agencies. The
Watkins also cited prudent and conservative financial management practices, balanced budgets with surpluses every year, record reserves and economy that is outpacing growth in U.S. and other states.
"The amount of debt secured by gas taxes is limited statutorily," Watkins said. "The state has always paid debt service from the primary revenue pledge and never had to rely on the state's full faith and credit backstop."
The gas and diesel fuel tax rate that backs the bonds are indexed to inflation, according
The current tax rate, 17.5 cents per gallon, is up more than 33% since 2015.
Total collections, $1.96 billion in fiscal 2024, are up more than 44% since fiscal 2015, reflecting gallons sold that have increased every year except the two impacted by the pandemic.
"Debt service coverage from gas taxes is over four times which means gas taxes would have to drop by over 75% before they would be insufficient to cover annual debt service requirements," Watkins said. "If that did happen, which it never has and do not expect in future, the state would pay from its general revenues which has never been called on and if it were, we have plenty of money to pay."
In September Florida's Office of Economic and Demographic research said without changes to revenue and expenditure policies
"The projection of deficits isn't new in general although Florida has really enjoyed a boom of new people moving to the state," Mousseau said. "I think you will see some belt tightening on the part of the state. This will be true of other states as well."
S&P directors Tom Zemetis and Oscar Padilla said they expect the Florida legislature to take the projections into account in its budget development process.
"Our focus remains on the state's ability to maintain structural balance and fiscal discipline in light of evolving economic conditions, which has been the case through recent budget cycles. We will continue to monitor if revenue and spending significantly alter the state's approach to fiscal 2026 budget and future budgets," the S&P analysts said.
Dominic Calabro, president and chief executive officer of Florida Tax Watch, said in mid-December the state faced much more serious deficits in the Great Recession and overcame them responsibly.
While addressing the projected deficits will be "a lot of work," the legislative leadership will balance the budget, Calabro said.
A mix of federal government policy and
Florida ranked second to California in the number of registered EVs in 2023, with more than a quarter-million,
That is only 1.4% of vehicles on the Florida roads, but marked a more than 50% year-over-year increase.
A bill to add an annual fee to electric and plug-in hybrid vehicles
The POS for the Florida deal doesn't mention EVs.
"Florida's comparatively strong population growth trends and economic activity relative to other states, coupled with annual tax rate adjustments made to reflect the change in the Consumer Price Index, has continued to drive growth and resiliency in motor fuel taxes, even as fuel efficiency standards continue [to] improve and electric vehicles have gained market share," Zemetis and Padilla said.
As electrical vehicle adoption increases over the long term "alternative transportation revenue-raising mechanisms or motor fuel tax rate adjustments will become more imperative," they said. "Florida Estimating Conference on Transportation Revenue indicates a slowing but positive trajectory over the long-term, which we believe provides the state with sufficient headroom to implement changes, as necessary."
Municipal Market Analytics Partner Matt Fabian said slowing gas tax revenues would be more of a concern for Florida's government and populace than for bondholders. If the revenues go down too much, the state will have to increase taxes for its general fund.
Mousseau said he thinks President-elect Donald Trump's plan to restore the income tax deduction for state and local taxes — taken away under
"There is no longer the house flip largesse in going to Florida and the cost of living in Florida is now much higher when factoring in higher insurance, homeowners' association fees in many cases and the overall cost of being in Florida," he said. "This is good for Northeast states on several levels."
Mousseau said he thought population growth in Florida will slow. But the state is "of such high credit quality that I don't think it's an issue." On Monday he said the bonds would get a "great reception."
S&P's Zemetis said the ratings agency's AAA rating "reflects our opinion of Florida's continued employment and population growth, anticipated steady general revenue growth and revenue collections, focus on structural budgetary balance and comparatively high reserves, and relatively well-funded pension and manageable debt burden." He said he expected the state's economic and revenue growth would likely remain positive albeit at reduced levels.
Moody's explained its Aaa rating by saying the fuel tax levy is adjusted annually for inflation and by pointing to the state's "large and diverse economy, well-managed finances and low long-term liabilities."
While
Fitch in a July report said the state's low debt and liabilities and strong reserves contributed to its AAA rating. The agency said the state mainly drew revenues from sales taxes, which the ratings agency expects to grow at or better than the U.S. gross domestic product.
Greenberg Traurig is the bond counsel on the issue.
Jessica Lerner contributed to this story.