BRADENTON, Fla. – Streets flooded in the Shorecrest neighborhood of Miami last month because of a full moon and an exceptionally high tide.
The perennial “king tide” has worsened in recent years, with some believing that climate change is the culprit. Perhaps Miami voters thought about that Tuesday when agreeing to tax themselves to borrow $400 million, some of which will be used for climate change-related projects and affordable housing.
Addressing those issues is credit positive for Miami, Moody's Investors Service said, because they will help support the city’s economy and residents.
“Additional debt will increase the city’s above-average debt burden and fixed cost burden, but these burdens will remain manageable despite the additional borrowing,” said analyst Valentina Gomez.
Moody’s rates Miami’s special obligation non-ad valorem revenue bonds A1, with a positive outlook.
Gomez said the frequency of flooding during high tides has increased throughout the city, including downtown.
“With additional downtown development in the pipeline, flood mitigation is important to keep the area attractive to residents and visitors,” she said. “Affordable housing is an ongoing issue in a city, which has low income levels, low unemployment and a high cost of living.”
The $400 million GO referendum passed with nearly 57% of the votes on the Nov. 7 ballot.
Miami city commissioners have earmarked $192 million of bond proceeds for climate change-related projects such as sea walls and pumps to curb flooding, while $100 million will finance affordable housing projects and the remainder will be used for parks and cultural facilities, road improvements and public safety.
The city expects to pay for the new debt with an existing 3% tax that was allocated to a previous bond issue.
The “Miami Forever” GO bond program is a priority of outgoing Mayor Tomás Regalado.
“This is a victory for the next generation of Miami,” Regalado said in July, when commissioners voted to place the referendum on the ballot.
City Commissioner Francis Suarez was elected mayor in Tuesday’s election.
Miami’s debt burden and annual fixed costs will increase as a result of additional debt, although Moody’s said it expects the costs to remain manageable.
The city’s total governmental debt at the end of fiscal 2016 was $720 million, or 1.2% of 2016 full assessed value. If the $400 million in debt were issued immediately, the debt burden would increase to 1.6% of 2017 full value, Moody’s said.
“Given that the debt will likely be issued over a number of years in more than one series - while the city’s tax base continues to grow - it is unlikely that the additional debt will significantly impact the debt burden,” Gomez said.
The city’s fixed costs, comprised of debt service and contributions to pensions and other post-employment benefits, totaled an above average 22% of operating revenues in 2016, she said.