BOND RATINGS AND THE RATING PROCESS:

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BOND RATINGS AND THE RATING PROCESS WHAT
THEY MEAN AND HOW TO IMPROVE YOURS
November 12 , 2007 FGFOA, Palm Beach
Gardens Fred Winterkamp, Orange County
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Presentation Outline

• Ratings Basics
• Successful Ratings Initiative
• Case Study Orange TDT
• Successful Ratings Presentation
• Conclusion

Section Description
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Presentation Outline

• Ratings Basics
• Successful Ratings Initiative
• Case Study Orange TDT
• Successful Ratings Presentation
• Conclusion

Section Description
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Rating Basics

• Credit Ratings are an independent assessment of
  financial strength
• Bond insurers sets their costs
• Investors some require ratings
• Political useful as a guide
• Rating Keys
• High Coverage - 2x or more
• Low per capita debt ratio
• Stable Repayment Source
• Cash Reserves and Debt Reserves
• Strong Economy
• Professional Management and Politics

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Rating Basics

• Rating Policy and Goals
• What Sources? General Obligation Ad Valorem vs.
  Sales Tax, Fees, Revenues from Operations
• What collection levels? Hold extra cash or just
  enough revenue
• How much debt? Manageable or Crisis Situation
• How much growth and economic stimulus? Growing
  population and business vs. No Growth approach
• A debt funding and ratings process means
  accepting a responsibility that requires
  oversight and commitment for several decades

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Presentation Outline

• Ratings Basics
• Successful Ratings Initiative
• Case Study Orange TDT
• Successful Ratings Presentation
• Conclusion

Section Description
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Ratings Initiative
More Challenging Single Deal Focus
Apprehension/Insecurity Reluctant and
minimalist Overly Aggressive Sensitivity
Analysis Indifference and Pragmatism
More Favorable Rating Policy Vision for Future
Self Awareness/Confidence Demonstrate
Strength Mitigate/Overcome Weakness Open and
comprehensive Conservative Under-promise
Over-deliver Success builds credibility Accept
long-term commitment
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Presentation Outline

• Ratings Basics
• Successful Ratings Initiative
• Case Study Orange TDT
• Successful Ratings Presentation
• Conclusion

Section Description
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Case Study Orange County TDT
TDT Tourist Development Tax, lodging/bed tax,
primary funding for Orange County Convention
Center OCCC and Orlando Arena, Citrus Bowl
Stadium, and OPAC 1971 Walt Disney World Magic
Kingdom 1973 SeaWorld Orlando 1979 - TDT
levied in 1979 at 2 1982 Walt Disney
EPCOT 1983 Convention Center OCCC Phase I 1986
TDT levy raised to 3 - Convention Center
OCCC Phase II 1989 NBA Orlando Magic and
Arena - Walt Disney MGM Studios
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Case Study Orange County TDT
1990 TDT levy raised to 4 - Universal
Studios Orlando 1994 TDT Rating Presentation
(OCCC expansion) - TDT Ratings Fitch A,
SP A, and Moodys A3 1995 TDT levy raised
to 5 1996 - Convention Center OCCC Phase III
IV (500 mill) 1998 to 2000 - TDT Rating
Presentations (OCCC expansion) 1998 Walt Disney
World Animal Kingdom 1999 Universal Studios
Islands of Adventure 2000 - Upgrade Fitch A,
SP A, and Moodys A2
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Case Study Orange County TDT
2002 to 2003 Terrorism, war, recession tourism
decline 2002 TDT Rating Presentation (declining
TDT 30) - Ratings Fitch A, SP A, and
Moodys A2 - CreditWatch, Negative Outlook,
Neg Implications 2003 - Convention Center OCCC
Phase V (750 mill) 2004 to 2005 TDT recovers,
overcomes stress test 2006 TDT levy raised to
6 - TDT Rating Presentations (TDT
growth, Eco diversity) 2007 Upgrade Fitch
A, SP A, and Moodys A2
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Case Study Orange County TDT

• Policy Use TDT to fund tourism industry growth
  as economic stimulus to create jobs and business
  investment
• Close partnership with rating agencies
• Describe vision, success builds credibility
• Recurring cycle of investment and growth
• Decades of TDT strong growth and a stress test
• Rating Actions positive and cautionary
• Ratings are an ongoing commitment

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Presentation Outline

• Ratings Basics
• Successful Ratings Initiative
• Case Study Orange TDT
• Successful Ratings Presentation
• Conclusion

Section Description
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Rating Presentation

• Type of presentation
• Major new project or revenue challenge
• Minor refunding or update
• Surveillance periodic agency review
• Presentation Plan
• Set Goals
• Determine Process What support
• Location
• Your Locale impressive visual to show
• New York occasionally as partnership
• Teleconference Minor or surveillance

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Rating Presentation

• Presentation Structure
• Your Plan
• Share your goals and expectations
• The Credit
• Why should they agree with your plan?
• Active staff do not dump on Bankers/FA
• Macro Economics
• Put your Credit in context of economy
• Present the diversity and growth
• Transportation Impacts Addressed?
• Indirect Development Business?
• Q A period Expect follow-up info requests
  Staff subject expertise

Make your message descriptive and thorough, dont
assume they know you
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Presentation Outline

• Ratings Basics
• Successful Ratings Initiative
• Case Study Orange TDT
• Successful Ratings Presentation
• Conclusion

Section Description
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THANK YOU !!!