BRADENTON, Fla. — Miami-Dade County will continue financing its massive, voter-approved transportation improvement program next week with the issuance of $540 million of transit system sales tax revenue bonds.
Proceeds will be used to fund new projects, refinance $100 million of bond anticipation notes issued last year to provide interim financing, and pay capitalized interest through July 2014.
Book-runner JPMorgan is expected to price the 30-year bonds for retail on July 18 and for institutional investors July 19.
The transaction is expected to be structured similar to previous transit tax deals, with serial and term bonds, to provide level debt service, according to county officials. The bonds are secured by a half-cent sales tax approved by voters in 2002.
The proceeds are used to exclusively fund transportation improvements. The special tax does not expire.
The bonds are rated AA-minus by Fitch Ratings, AA by Standard & Poor’s and A1 by Moody’s Investors Service.
All three rating agencies have stable outlooks on the debt.
Moody’s rating, however, was downgraded last week, though it still incorporates the strength of the countywide sales tax pledge on transactions up to $5,000, recent improving collection trends and adequate legal covenants.
“The rating downgrade to A1 from Aa3 reflects Miami-Dade Transit’s highly leveraged senior sales-surtax revenues, sizeable capital plans, declining debt service coverage, and narrow financial operations with increased reliance on general fund support from Miami-Dade County,” Moody’s analyst Xavier Smith wrote.
Fiscal 2011 sales tax receipts provided 1.69 times peak coverage of debt service on the bonds, which was “narrowly above the additional bonds test of 1.50 times,” according to Smith.
“Sales tax revenues for the 12 months ending March 2012, which show an improving trend, provide 1.76 times coverage of peak debt service on the bonds,” he said. “Coverage levels are likely to decline given Miami-Dade Transit’s plans to issue $600 million in additional bonds between now and fiscal 2016.”
Debt service requirements, including the issuance of additional bonds, increase from $95 million in fiscal 2015 to $112 million in fiscal 2016, and to $138 million in fiscal 2017, Smith said.
Moody’s expects the transit system to benefit from the stable growth of dedicated sales tax revenues, but Smith said taxable sales growth in Miami-Dade County is vulnerable to economic fluctuations as demonstrated in the most recent recession.
Since they were initially levied in 2003, transit sales tax collections increased annually at an average rate of 2% each year.
“However, year-over-year performance of the revenue has been particularly volatile,” Smith said. “While the tax has had a compound annual growth rate of 2% since its inception, it has taken five years to return to its pre-recession peak.”
Tax collections declined in 2008 and 2009, though they have now returned to pre-recession norms.
In 2011, tax collections increased by 7.1% following a modest 2.3% increase in 2010.
“Management is projecting fiscal 2012 pledged revenues to increase 6.3% over the prior year which is conservative given that year-to-date revenues are 8% ahead of the same time last year,” Smith said.
Miami-Dade County’s primary economic driver, tourism, suffered because of lower domestic and international travel during the economic downturn.
The county’s real estate market, which had been bolstered by low interest rates and international investment, experienced a material slowdown as did new building permits.
According to a report by Moody’s Economy.com in March, recovery in the Miami-Dade metropolitan area will strengthen on the back of service-sector expansion and international spending, according to Smith.
“Long term, Miami-Dade is expected to outperform the nation because of its growing infrastructure, strong international trade ties and stature as an international tourist destination,” he said.
The dedicated half-cent transit tax has leveraged $1 billion of bonds to fund a variety of projects in Florida’s most populous county.
One major project in particular that has benefitted from the tax is the $506 million AirportLink, a 2.4-mile elevated connector between Miami International Airport and other forms of transit, including the county’s 22-mile Metrorail system, which links to Tri-Rail and connections with Broward and Palm Beach counties.
Of the cost to build AirportLink, $404.7 million has been funded by Miami-Dade County’s half-cent tax with the Florida Department of Transportation picking up the remaining $101.3 million.
The airport connector has been under construction since 2009 and is set to open July 28, according to Patrice Koonce Rosemond, spokeswoman for the Citizens’ Independent Transportation Trust, a quasi-judicial panel that reviews and approves all projects funded with the tax proceeds.
Miami-Dade County last sold transit tax bonds in 2010. That deal was structured with $30 million of tax-exempt bonds maturing in 2020 and $187.6 million of taxable Build America Bonds maturing in 2039.
The 2010 bonds financed projects such as ongoing costs associated with an intermodal center, control equipment, rail vehicle replacement, road and traffic operational improvements, and street lights.
The $100 million of bond anticipation notes sold last year to provide interim financing for certain projects are being taken out with the bonds being sold next week.
Public Resources Advisory Group is the financial advisor for next week’s debt sale.
Along with JPMorgan, other firms in the syndicate are Bank of America Merrill Lynch, Barclays Capital, Blaylock Robert Van LLC, Cabrera Capital Markets, Citi, Estrada Hinojosa & Co., Goldman, Sachs & Co., Jackson Securities, Jefferies & Co., Morgan Stanley, M.R. Beal & Co., Raymond James | Morgan Keegan, and Rice Financial Products Co.
Greenberg Traurig PA and Edwards & Associates PA are co-bond counsel.
Nabors, Giblin & Nickerson PA and Liebler, Gonzalez & Portuondo PA are co-disclosure counsel.
GrayRobinson PA is underwriters’ counsel.