BRADENTON, Fla. — Miami-Dade County expects to be in the market early next week for a two-day pricing of $600 million of water and sewer bonds — the first round of large yearly debt sales for a newly revised $4.2 billion capital improvement program.

Proceeds will be used to finance capital improvements, repay a credit line up to $100 million, fund capitalized interest, and pay issuance costs. The deal is expected to be the first of five annual offerings the county will bring to market as it uses bonds to finance 83% of the five-year capital improvement program as it currently is envisioned.

Raymond James & Associates Inc. will be the book-runner of a large syndicate selling to retail investors on Monday and concluding with institutional sales Tuesday.

The deal is expected to be structured with serial maturities from 2011 to 2030 and two term bonds in 2035 and 2039, though that could be revised to accommodate market conditions. A decision had not been made by press time whether to insure the bonds.

The offering is being sold entirely as fixed-rate tax-exempts. Officials said taxable Build America Bonds were considered but BABs could not be used by the Water and Sewer Department without going through the lengthy process of amending bond documents and obtaining bondholders' consent to accommodate the subsidy in the flow of funds.

The principal amortization of the deal will be wrapped around the outstanding water and sewer debt by offering more bonds in later maturities.

However, the underwriting team has the flexibility to bifurcate maturities in an effort to accommodate the needs of retail and institutional accounts.

A number of factors — such as an issuer well known to the market, the essential nature of water and sewer services, and A-level ratings — are expected to result in "good investor appetite" for the bonds from retail and institutional investors, a market observer said.

Located in southeast Florida, Miami-Dade County covers more than 2,000 square miles and 34 municipalities, with a population of more than 2.5 million.

The county owns most, if not all, of the water and sewer facilities within its boundaries, serving 418,000 retail and 14 wholesale water customers, and 336,000 retail and 12 wholesale wastewater customers.

Next week's deal will support a five-year, $4.2 billion capital improvement program for the 2010 to 2015 period, which is up from $2.9 billion forecast just a year earlier for the 2009 to 2014 period. The revised CIP is driven to some extent by new local, state, and federal requirements imposed on the county, Florida's largest.

The new CIP not only reflects revisions that are made annually in response to new regulations and requirements but planned future project costs that are coming into the five-year budgetary cycle, according to Diane Camacho, assistant director of finance for the Water and Sewer Department.

"Some numbers will move a lot" from year to year, she said. "We certainly have projects we have committed to doing, but they are not projects that have been designed, so it's very difficult to project what they cost. So there is a lot of potential for future uncertainty."

That uncertainty is not just because of new regulations and potentially higher costs, but can also be driven by economic changes that have positive results, Camacho said.

For example, she said, a $650 million high-level disinfection project required by the state "is coming in under budget and ahead of schedule, so we reduced the budget by $83 million."

She also said demand for water has dropped 8% over the past few years largely because of watering restrictions and aggressive water conservation programs, and that could result in deferral of some projects.

"The CIP relies fairly heavily on additional bonds, but whether or not that program comes about as currently budgeted remains to be seen," Camacho said. "If it does, we're going to be in the market every year."

The county's consultants have projected that in addition to next week's sale, the current CIP would require the county to sell approximately $480 million of water and sewer bonds in fiscal 2011, $775 million in fiscal 2012, $646 million in fiscal 2013, and $589 million in fiscal 2014.

The increased CIP is largely what prompted Fitch Ratings to downgrade its rating to A from A-plus while maintaining a stable outlook on the bonds being sold next week and on $1.4 billion of Miami-Dade's water and sewer revenue bonds it rates. The outlook is stable.

Moody's Investors Service maintained its A1 rating and stable outlook, and also expressed concern about the sizeable CIP going forward. Standard & Poor's affirmed its A-plus rating and stable outlook, county officials said.

The Water and Sewer Department's "low rates remain generally affordable" and provide flexibility to absorb the projected growth in annual debt obligations, Fitch said.

Despite the county's troubled real estate market, the water and sewer program maintains multiple collection-enforcement mechanisms and benefits from a broad and diverse service area, Fitch added.

Moody's said its rating is based in part on good management that has enabled the county to adhere to consent decrees with state and federal agencies.

In addition to Raymond James, other firms in the syndicate are Barclays Capital, Estrada Hinojosa & Co., Goldman, Sachs & Co., Jackson Securities, JPMorgan, Loop Capital Markets LLC, Morgan Keegan & Co., M.R. Beal & Co., Ramirez & Co., Rice Financial Products Co., Siebert Brandford Shank & Co., Stifel, Nicolaus & Co., and Wells Fargo Securities.

Public Resources Advisory Group is the financial adviser.

Squire, Sanders & Dempsey LLP and KnoxSeaton are co-bond counsel. Hogan & Hartson LLP, McGhee & Associates LLC, and Jose A. Villalobos PA are disclosure counsel. Nabors, Giblin & Nickerson PA is underwriters' counsel.

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