ATLANTA -- Market participants say Brevard County, Fla., will have a very hard time selling tax-exempts if it sticks to its decion to let voters pass judgment on a 1989 lease-purchase deal.

Yesterday's warnings followed approvall by the county commisioners this week of a courthouse building project to be financed by tax-exempts.

They are moving ahead with the project even though in September they decided to put a motion on the March ballot on whether to terminate the lease backing a $23.9 million certificates of participation deal. The COPs were sold in 1989 to fund a county government operations center.

The county's referendum would be the first to put an already-completed lease transaction to a public vote, market participants say.

Officials at both Moody's Investors Service and Standard & Poor's Corp., and at Municipal Bond Investors Assurance Corp., warned that as long as uncertainty remains over the county commitment's to the 1989 lease obligation, the county will face difficulties selling any kind of tax-exempts for any project.

MBIA acquired the insurance policy on the $23.9 million of COPs from Bond Investors Guaranty Insurance Co., when it took over BI-Glin 1989.

"We feel the decision [to hold the referendum] would have a detrimental effect on the credit rating of any future debt issued by the county because it goes to the question of the county's williness to repay its debt fully and on time," Marci Edwards, a vice president and director of regional ratings at Moody's, said yesterday. "As it makes plans for another financing, we urge the county to consider its actions very carefully."

Ms. Edwards said the rating agency has put the county's GO bond rating under review in light of the referendum decision, and will issue a report on that action, which could include a revised GO bond rating, in the next several days.

"Given the cloud that hangs over the lease financing in Brevard County, we have serious concerns about the county's commitment to meet any debt service obligation on future borrowers," said Steven Nelli, an assistant vice president at Standard & Poor's Corp. "Our worries are most intense with lease-purchase arrangements, but they also extend to other tax-exempt borrowings."

Brevard County's GO debt is rated A by Moody's. Standard & Poor's does not apply rating to this credit.

A spokesman for MBIA also issued a very forceful response to the prospect of the county selling debt should it persist in its planned referendum.

"Should Brevard County terminate the government center lease, MBIA would not insure any Brevard County issues that may come to market in the near future," said Michael C. Ballinger.

"MBIA does not look favorably on nonappropriation under any circumstances," he continued. "In fact, MBIA would have to seriously consider whether to ever insure an issue whose ultimate obligor has defaulted on an obligation."

County Administrator Tom N. Jenkins said yesterday that county officials are aware of the concern of municipal market participants, and will consider those concerns in the meeting set for Oct. 29 to review the decision to put the 1989 lease deal before voters.

He said the decision to call for the referendum was prompted by defects in the construction of the governmental operations center. Board members were also displeased with the decision to locate the project outside of Titusville, long the center of government in the county.

"It would be unfortunate if the prospect of a referendum were to raise the county's cost in future [municipal securities] issuances or restrict its ability to access the municipal market," Mr. Jenkins said.

"County commissioners will be made aware of the consequences," he said, noting that at the October meeting finance officials would present assessments of the market impact of a negative referendum vote.

Mr. Jenkins said county officials have not yet decided on the specific financing mechanism to fund the court project, but that it will "definitely" involve tax-exempt securities.

He said the total cost is also uncertain but it will likely total about $13 million, which will include renovation of three existing court facilities and the construction of a new civil court building. The county is under a court order to improve its courthouses and would like to move fowward with a financing plan in the next few months, he said.

As long as the prospect of a referendum remains, the county would likely avoid selling a lease transactions to fund the court project, Mr. Jenkins said. One alternative to this kind of financing, he said, might be a bond issue that specifies a specific revenue stream, such as a surcharge on traffic ticket fines. Court filing fees could also be used to back the court-building transaction, he said.

Mr. Jenkins noted that in addition to the judicial facilities, the county must also move soon on approving a $25 million solid waste disposal facility. He said he expects county commissioners to take such action within the next 30 to 60 days.

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