BRADENTON, Fla. - Standard & Poor's on Friday affirmed its BBB rating on Miami's general obligation bonds and its BBB-minus rating on the city's non-ad valorem and limited-tax debt.
The outlook is negative. Miami had a combined total of $719.7 million of outstanding bonds as of Sept. 30, 2011.
S&P issued a review of the city's financial position, and two ongoing Securities and Exchange Commission investigations, ahead of Miami's $50 million limited public offering this week to refinance a bank loan.
Standard & Poor's was not asked to rate this week's deal, though the offering required the agency to conduct a review of the city's GOs, according to a spokesperson for the rating agency. S&P traditionally has rated most or all of the city's debt.
The bonds will be sold to sophisticated institutional investors beginning Monday, and the sale will continue through the rest of the week as necessary.
The debt is rated A3 by Moody's Investors Service and BBB-plus by Fitch Ratings.
"Because this is a limited sale, we do not see the value in having all three rating agency because we've already been told that some sophisticated institutional buyers are not interested in three ratings," said Janice Larned, chief financial officer and assistant city manager. "It is not a reflection on any one rating agency."
The city's financial advisor, Public Financial Management Inc., concurred with the decision to sell the bonds with two ratings, Larned said.
According to S&P, it's BBB and BBB-minus ratings reflect a structurally imbalanced budget, weakened reserve levels over the years, limited tax-raising capacity, an economy constrained by a severely weakened housing market, above-average unemployment, low income levels, and ongoing union labor contract litigation.
The city has also experienced "frequent management turnover and instability that have extended its inability to maintain structural balance," said S&P analyst Le T Quach.
Standard & Poor's said Miami's outlook remains negative due to a fragile economy as well as lingering litigation and the SEC investigations, which could expose the city to "significant" liabilities and legal costs at a time when available reserves and liquidity are low.
Miami reported that it will end fiscal 2012 with a $37 million general fund operating surplus that stems from better-than-budgeted sales, gas, and parking tax collections, and red light camera fees. The surplus is also due, in part, to a hiring freeze and uptick in tourism activity and retail sales in the region.
The SEC is investigating the city for disclosure issues as well as the financing for parking garages serving the Miami Marlins' new stadium. The IRS in November 2011 opened a routine examination into $153.1 million of capital improvement bonds sold in 2007.