BRADENTON, Fla. — Still under ongoing federal scrutiny related to past bond deals, Miami closed on the sale of $45 million of revenue bonds Thursday for an all-in, true-interest cost of 3.82%.
The bonds were sold within an hour after pricing began on Dec. 7 to Goldman Sachs, Federated, Delphi, and Assured Guaranty, according to city officials.
Proceeds are being used to refinance a two-year loan with Wells Fargo Bank that was used to pay for a portion of the city's cost of building underwater tunnels to the Port of Miami. The tunnels will relieve severe traffic congestion through downtown Miami, which is currently the only access to the port.
The successful financing at 3.82% was well below the 4.24% the city anticipated before pricing, according to chief financial officer Janice Larned.
"We are very pleased, and we did our job," Larned said, referring to taking advantage of the tax-exempt bond market to obtain the lowest borrowing cost for the city.
Only qualified investors were allowed to take part in the city's limited offering because of two ongoing investigations by the Securities and Exchange Commission into prior transactions, as well as a routine examination by the Internal Revenue Service into $153.1 million of capital improvement bonds sold in 2007.
"This bond sale demonstrates that the sophisticated investors have confidence in the city of Miami and its future," Commissioner Wifredo "Willy" Gort said in a news release. "We were able to get to the market at the right time and accomplished the transaction successfully."
While the bonds are Miami's obligation, and secured by a covenant to budget and appropriate, debt service is expected to be paid by the Omni Community Redevelopment Agency.
The $44.7 million par amount of bonds sold this month with a $5.3 million premium. Average annual debt service will be about $4 million. Total debt service to be paid over the 18-year life of the bonds will be $67 million, the city reported.
Serial bonds were sold with yields ranging from 1.87% with a 3% coupon in 2016, to 2.31% with a 4% coupon in 2018, to 3.08% with a 5% coupon in 2022.
A $27.8 million term bond yielded 3.59% with a 5% coupon in 2030.
The bonds are rated A3 by Moody's Investors Service and BBB-plus by Fitch Ratings.
In a report on the deal, Moody's concluded a rating review of the city's credit position, affirmed all of its ratings, and placed a negative outlook on the city's debt "based on the city's continued need to control above-average fixed costs, uncertainties related to managerial turnover, and the ongoing SEC investigation."
Fitch affirmed its ratings, including its A-minus on the city's general obligation and special obligation non-ad valorem revenue bonds. Fitch also revised its outlook to stable from negative on the GO and special obligation bonds.