BRADENTON, Fla. – The collapse of a Port St. Lucie, Fla.-based economic development project led Moody's Investors Service on Wednesday to place the city's bond ratings under review for downgrade.
Moody's said the failure of the start-up Vaccine and Gene Therapy Institute of Florida, and related litigation, prompted its review.
The review covers the city’s A1 general obligation bond rating, and the A2 ratings assigned to the non-ad valorem, lease, and guaranteed debt. The city had $440 million of outstanding long-term debt as of Sept. 30, 2015.
Port St. Lucie filed suit in May 2015 charging that VGTI defaulted on mortgage payments securing $64 million of bonds the city guaranteed to build the institute's 100,000-square-foot research facility. VGTI is now under receivership. It announced in August 2015 that it would abandon the facility.
The city has complied with its covenants to cure reserve fund deficiencies for VGTI-related bonds, and is making bond payments, Moody's analysts said.
Moody's also noted that on Feb. 29 the bond trustee, TD Bank NA, filed a notice questioning the city's willingness to pay its legal fees, and cited concerns about the tax-exempt status of the bonds should the city lease or sell the VGTI building.
"Currently, we are reimbursing the reserve fund in the amount agreed upon by the city and the trustee as well as paying all debt service requirements going forward," interim city attorney Azlina Siegel told The Bond Buyer March 3. She also said the city planned to meet with the trustee "to resolve outstanding issues."
Because the city guaranteed "a material amount of debt" for economic development projects, Moody's said its review will focus on the city's ability to support them while maintaining financial flexibility, the likely trajectory of all guaranteed obligations, and the city's plans for the liabilities.
Port St. Lucie is about 50 miles north of West Palm Beach. The city currently has $25.5 million in cash on hand in its general fund, according to Moody's.
The VGTI project was the city's fourth failed economic development investment, according to the 2015 comprehensive annual financial report. Another failed project was the Digital Domain special effects company, which filed for bankruptcy several years ago.
