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Miami-Dade Gets Flexible

BRADENTON, Fla. - In what is being called a "flexible" deal due to continuing volatile market conditions, Miami-Dade County officials today plan to sell only a portion of the $350 million of general obligation bonds they had hoped to bring to market.

Meanwhile, experience with bond market turmoil this year has prompted Miami-Dade elected officials to require detailed reports written in plain language on all bond deals. And at least one commissioner wants to determine if the county can legally pursue outside professionals who worked on swap and bond deals that went south this year.

To deal with current conditions, the county has broken its planned sale of $350 million of GOs into several tranches, beginning today with a $172 million competitive offering. Bids will be taken between 10:15 a.m. and 10:30 a.m. Eastern Time via www.PFMauction.com.

The transaction represents the third series of debt to be sold in Miami-Dade's Building Better Communities Program - a $3 billion bond authorization approved by voters November 2004 to finance infrastructure improvements as well as emergency, health care and public service outreach facilities, housing for the elderly, and cultural and multicultural educational facilities.

Along with reducing the size of the transaction originally planned for today, officials have reserved the right to increase or decrease the par amount by 10%, and the serial bonds will have 20-year maturities instead of 30 years, though the winning bidder could choose to extend maturities.

The flexible sale conditions represent the county's effort to be nimble given uncertain times for financings and the need to move forward and fund capital projects, said Miami-Dade finance director Rachel Baum.

"We want to be able to meet the market's needs," Baum said. "With the feedback we're currently getting from our underwriters, we're hopeful that we will be able to sell this tranche."

Like other issuers that typically sell GO bonds competitively, Miami-Dade also is prepared to sell the deal on a negotiated basis if necessary. Bids could also be rejected and the bonds sold at a later date.

Insurance is up to the discretion of the bidder, according to Lidia Monzon-Aguirre, director of the county's Bond Administration Division. She noted that credit agencies affirmed the ratings on the Building Better Communities bonds, with today's deal receiving a Aa3 from Moody's Investors Service and a AA-minus from Standard & Poor's.

"We figured by doing it in tranches at least now we could get a portion of [the $350 million] done, and if the appetite is for shorter maturities we would do that now and leave the longer maturities for the next tranche, when hopefully the market will stabilize," Monzon-Aguirre said.

The next tranche is expected to sell early next year.

"We look forward to some good competitive bids," Baum said. "We're a strong credit and it's a good investment in our opinion."

Today's offering is Miami-Dade's last sale of the year, and it's expected to be last bond transaction overseen by Baum, who is retiring at the end of the year. A new finance director is expected to be announced next week.

Public Financial Management Inc. is the county's financial adviser on today's GO sale. Greenberg Traurig PA and Edwards & Associates PA are co-bond counsel. Hunton & Williams LLP and Thomas H. Williams Jr. PL are co-disclosure counsel.

Like many issuers responding to the market meltdown and downgrades of bond insurers, Miami-Dade has been forced to restructure its variable-rate debt and terminate some swaps. In the second half of this year, the county paid an estimated $120 million for swap termination payments on two water and sewer deals.

Miami-Dade County commissioners last week unanimously directed that reports - written in "plain language" - be prepared to disclose all risks associated with the issuance of each series of bonds as well as swaps, the use of insurance, and liquidity facilities. Detailed information for the sale of all bonds and notes - including the interest rates, amortization schedule, the names of participants in the deals, and all costs - must be distributed to each commissioner within five days after pricing.

Commissioners also required that the Budget and Finance Committee receive annual reports on bonds and swaps, as well as a memorandum describing current market conditions and risks. The committee is to receive quarterly reports if circumstances warrant or adverse events occur in the marketplace.

"I want to make sure that the commission fully understands when the county issues debt, in plain language, what the risks are involved with that," said Commissioner Carlos Gimenez, who sponsored the resolution on new debt reporting policies.

Although the county's finance officials always present detailed reports on financings as they are approved by the board, Gimenez said, "Some finance terms are hard to understand."

Gimenez, who has been a county commissioner four years and also served as the city manager for Miami from 2000 until 2003 as it emerged from financial problems, called himself a conservative when it comes to finances.

"We're making decisions involving millions of dollars so we need to understand exactly what we're committing to," he said.

Gimenez, who is vice chairman of the county's Budget and Finance Committee, said that since Miami-Dade suffered millions in losses on swap termination payments this year that he will not vote to approve any more swaps, nor will he support zero-coupon bonds.

"I've always had concerns about swaps and some of these swaps have come back to bite us," he said. "I'm not saying there were any misdeeds. This is not our money. It's the people's money."

At his urging, the Budget and Finance Committee Tuesday passed a resolution requesting that the full commission order the county attorney to determine if legal action should be taken against outside professionals who participated in the soured variable- and auction-rate bond and swap transactions.

Gimenez wants the legal review to include potential action against bond insurers, rating agencies, investment bankers, financial advisers, bond counsel, and all parties who participated in the deals.

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