Florida's fiscal shape helps cushion Charley's hit

Tue Aug 17, 2004
By Kristin Roberts

WASHINGTON, Aug 17 (Reuters) - Hurricane Charley may have caused up to $15 billion in damage in Florida, but that is not seen immediately hurting the state's credit picture thanks to strong finances and funds in reserve, analysts said Tuesday.

While serious, preliminary estimates show Charley was not as severe as Hurricane Andrew in 1992, the most expensive storm in U.S. history, said Robert Kurtter, a municipal analyst at Moody's Investors Service. Andrew, which hit the Miami area, cost $25 billion.

"From a state credit point of view, the state is in very strong financial condition," Kurtter said.

"It really emerged through this whole (economic) downturn in much stronger shape than most states and so I don't see any near-term credit risk to this state."

But officials warned it is still far too early to paint a clear picture of the extent of damage from Charley, which hit the southwest coast of Florida on Friday.

The preliminary figures range widely -- from $7 billion to $14 billion in insured losses -- and were generated from models before the storm even hit Florida, said Kathalyn Gaither, spokeswoman for the Florida Division of Emergency Management.

Insurance auditors and officials continue to gather data on losses and infrastructure damage. Auditors may have an updated but still preliminary assessment of losses based on claims, not modeling alone, by Tuesday afternoon, said Jack Nicholson, senior officer of state's Hurricane Catastrophe Fund.

The fund, established after Hurricane Andrew, has $5.6 billion in cash on hand.

If the insurance industry's losses exceed $4.5 billion, the state catastrophe fund would be tapped. If the catastrophe funds do not cover all costs, the fund would issue revenue bonds, Nicholson said. The bonds would be secured by emergency assessments and the reimbursement premiums that are collected every year.

Nicholson declined to speculate on the need for bonds at this point. He said it would likely be 30 days before the fund had a firm idea of total losses and funding needs.

But Moody's Kurtter, after a briefing with Florida officials, said a bond sale may not be necessary.

"It does not look like this is going to trigger a bonding event," Kurtter said.

BEYOND CREDIT

The largest impact of the storm in Florida may be on crops, especially the state's famed citrus harvest.

Hurricane Andrew caused $1.4 billion in damage to Florida's agriculture industry when it hit the Miami area. Andrew hit the state's lime, avocado and fresh vegetable markets. Charley, which hit Florida's southwest, is expected to be concentrated on cattle, ornamental and nursery plants and citrus.

Some companies have also begun to estimate their losses from the storm.

Outback Steakhouse Inc. (OSI.N: Quote, Profile, Research) said it expects a $1.8 million to $2.0 million loss in revenue from restaurants closed due to the storm. Car-dealer group CarMax Group Inc. (KMX.N: Quote, Profile, Research) said recent sales weakness was exacerbated by the hurricane.

Officials at Walt Disney World, which closed during the hurricane, did not return calls to comment on the impact of the storm at the theme park. Disney, part of California-based Walt Disney Co. (DIS.N: Quote, Profile, Research) , is a large part of Florida's immense and economically critical tourism industry.

 

More Financial News