BRADENTON, Fla. — Miami-Dade County, Fla., on Tuesday will competitively price approximately $200 million of transit system sales tax revenue bonds, which represents the first tranche of debt supporting an $8 billion transportation plan.
All-or-none bids for the Series 2006 bonds will be taken on Grant Street Group’s MuniAuction Web site. The 30-year, fixed-rate bonds will be insured by XL Capital Assurance Inc.
Proceeds will fund $28.2 million in bus and rail improvements, an $18 million fare collection system, $38.6 million in rail system improvements, $45 million for rapid-transit corridors, $31 million in major highway and road improvements, $19 million in neighborhood improvements, a $12 million cash-funded reserve, and issuance costs.
As structured, Miami-Dade’s plain vanilla deal is geared toward institutional sales and should be appealing since there’s been little Florida paper in the market, an underwriter in New York said yesterday.
However, the state competitively sold $160 million of lottery revenue bonds yesterday and the state has another $229 million of competitive sales on the day-to-day calendar. In addition, Hillsborough County also is slated Tuesday to competitively sell approximately $107 million of special assessment revenue bonds.
“The market can certainly absorb that,” the underwriter said. “There’s always a good appetite for Florida paper.”
Overall issuance in Florida was down 23.5% in the first quarter of 2006 as compared to the first quarter of last year, according to data from Thomson Financial.
Miami-Dade’s bonds will be secured by an open-ended, half-penny sales tax dedicated to transit projects and approved by voters in November 2002 under an initiative called the “People’s Transportation Plan.” Twenty percent of sales tax collections are distributed to the 31 municipalities within the county, while the remaining 80% of collections go to the county.
“This is the first pledge on that sales tax,” said Rachel Baum, finance director for Miami-Dade. “It’s a solid credit.”
Tuesday’s offering is secured by a strong revenue stream, Baum said.
Sales tax collections in the county increased 5.35% between fiscal years 2004 and 2005 and the Florida Revenue Estimating Conference estimates statewide that average sales and use tax revenues will grow 5.92% through 2015.
“Everything about this [deal] looks really good,” said Baum. “Because the marketplace feels comfortable with a sales tax credit, we and our financial adviser believe that it is a strong credit and that it will be well received.”
Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings have assigned ratings of AA-minus, A1, and A-plus, respectively, to the bonds.
Multiple factors supported Standard & Poor’s high rating as well as a stable outlook, analysts said yesterday.
“We were able to get to the AA-minus because it is a sales tax, it had strong voter approval and they did a good job getting citizen buy-in of the projects,” said Standard & Poor’s analysts John Sugden, noting that the county has a strong economic base and the bonds have strong legal provisions. “Even with significant bonding and a pretty aggressive capital plan, coverage is expected to remain strong.”
Standard & Poor’s analyst Robin Prunty said there are positive growth prospects going forward on the revenue stream support the bonds.
Fiscal 2005 revenues provide 11.3 times coverage of maximum annual debt service on senior-lien debt and although coverage is expected to decline due to significant additional bonding for an aggressive capital improvement plan, the county projects that senior-lien coverage will not fall below two times, Standard & Poor’s said.
Miami-Dade County is the most populous county in the southeast United States with more than 2.4 million residents and a congested transportation network within its 2,209-square-mile boundary. The county’s transit system is the largest in Florida and the 14th largest in the nation.
The population is projected to increase by 6% by 2010.
Since 2000, net assessed value has increased at an average annual rate of 9.7%, with a 21% increase in value between 2005 and 2006, to $175 billion.
The 15-member Citizens’ Independent Transportation Trust has been appointed to oversee spending of the transit sales tax proceeds.
The $8 billion transportation finance plan, which currently spans 30 years, contemplates the issuance of $1.8 billion in senior-lien revenue bonds, $900 million in subordinate financing for buses, and a $571.8 million commercial paper program secured by the transit tax and federal grants on a junior lien basis.
The comprehensive transportation plan includes construction of 88.9 miles of rapid transit, an increase of the county’s bus fleet from 700 to 1191 buses, plus funding of various neighborhood and major highway improvement projects.
The plan includes three major rail projects at a cost of over $2.6 billion for which the county expects to receive supplemental funding from state and federal agencies.
The county previously borrowed $100 million from the Sunshine State Governmental Financing Commission for transit projects, a subordinate loan obligation.
PFM Dade Advisors LLC is the financial adviser to the county.
Squire, Sanders & Dempsey LLP and the Knox Firm are co-bond counsel on Tuesday’s sale. Hogan & Hartson LLP, McGhee & Associates and Jose A. Villalobos PA are disclosure counsel.
