WASHINGTON - The volume of rated, uninsured lease offerings during the first half of the year ran ahead of 1991's record pace, indicating that the Brevard County, Fla., controversy has had no effect on the popularity of leasing, Standard & Poor's Corp. said.
"Investors do not appear to be avoiding leases" despite predictions that the lease market would be dealt a "crippling blow" by the county's referendum in March, Standard & Poor's said in a CreditWeek Municipal article scheduled for publication today.
The Brevard vote on continuing payment of the county's $24 billion office building lease issue occurred 100 days ago from this Thursday.
"S&P believes the vote in Brevard, and similar controversy concerning an unrated Richmond Unified School District, Calif., financing, reflects unique local circumstances and is not indicative of a national trend," said the agency, which has outstanding ratings on $35 billion of unenhanced leases.
"Given the fiscal and political uncertainties present for many governments, it is realistic to expect municipalities to occasionally debate the merits of making lease payments, especially for marginally essential projects," said agency director Steve Nelli, the article's author. "Actual defaults on publicly sold lease-secured bonds or certificates of participation, however, will remain extremely rare."
While the article does not state the volume of leases that Standard & Poor's has rated so far in 1993, it says volume is ahead of 1991's pace largely because of a continued high rate of refundings, which have constituted about one-third of lease issues so far this year.
The number of new issues in the lease market appears to be leveling off between $4 billion and $7 billion a year, the article says, and certain trends in the market may serve to constrain future growth.
In particular, two large states, California and New York, may see less leasing, Standard & Poor's said. In California, the increased use of special assessment bonds has led to less dependence on the technique, while in New York, debt reform and a legal challenge to appropriation-backed debt may cause decreased use.