Miami plans to refinance bonds so it can borrow more for parks, roads
By Paola Iuspa
Miami hopes to refinance part of its existing debt to save millions in interest and increase its capacity to borrow more in July - when it plans to start issuing bonds to repair roads, build parks and improve neighborhoods.
Commissioners have OK'd a city manager's proposal to refinance up to $43.5 million in general obligation bonds, to be paid off from property tax revenues, to save up to $2.75 million, said Albert A. del Castillo, a city-hired legal counsel and bond expert with Squire Sanders & Dempsey.
"The city will save about $350,000 a year for 15 to 17 years - it depends," Robert Nachlinger, assistant city manager overseeing the city's finances, said last week.
He said the annual savings would reduce debt payments, increasing the city's borrowing power.
"We plan on selling the bonds to a consortium out of New York on March 26," he said. Miami has not issued or refinanced bonds since 1996, when the city dove into a financial crisis with a $68 million deficit. The state in December removed the city's status of financial emergency. Right after that, some New York agencies upgraded the city's bond rating to investment level, from a prior risky-investment grade.
Mr. Nachlinger said the city is paying an average of 4.9% in interest but, after the refinancing, fees could range from 1.5% to 4.9%.
Moody's Investors Service two weeks ago assigned a Baa1 rating to those bonds to be refinanced. The higher bond rating would help the city get lower interest charged when repaying the debt.
Mr. del Castillo told commissioners his office spent months doing the required due diligence to determine the city's capability to refinance bonds.
Commissioner Joe Sanchez said it was the first time the city had taken its time and done a thorough investigative job before acquiring new debt.
Last week's decision to refinance came four months before city officials will prepare to start issuing a portion of the $255 million in bonds that voters approved in a November referendum.
An as-yet undetermined portion of the referendum's new Homeland Defense and Neighborhood Improvement Bond program will be issued in July - when Mr. Nachlinger's department receives the city's total assessed property value from the county. That amount is today estimated at about $15.4 billion, he said, and the more revenues the city is to receive, the more it can borrow.
Currently the city owes $110 million in general obligation debt, which can be used for infrastructure projects only, Mr. Nachlinger said. That debt is to be paid by 2017. The oldest bond was issued in 1977.
He said the city still has $20 million in unspent money earmarked for a sewer project in Coconut Grove. The work was never done because Grove residents opposed it. Bonds were issued in 1994 and are not general obligation bonds, he said.
"In 1994 non-property tax revenues were pledged to pay for those bonds," Mr. Nachlinger said.
Although no independent auditors checked to see if bond money was spent on the projects for which it was intended, Mr. Nachlinger said he thought things were done properly.
"I don't believe there has been a separate audit to review on the expenditure of those proceeds," he said.
But that is set to change.
Commissioners last week appointed a 15-member oversight board to check management of the new $255 million bond program, he said. Members are to watch to see that the bonds are being used in accordance with promises made to the public in the referendum.
"If something is not being done in accordance," he said, "they would bring the issue up to the commission."