City Of Miami Parking Agency Feel Bond Pinch
Written by Risa Polansky on March 13, 2008
By Risa Polansky
The tumult in the variable rate bond markets that has sent governments across the country into a tailspin has not spared local public entities.
Miami has $29 million in bonds and $10.7 million in government financing loans in variable rate markets.
Both have seen interest rates nearly double, the bonds from 6.43% to 11.47%, the loans from 3.5% to 6.5%.
And counting — rates change weekly.
Still, Treasurer S. Pete Chircut is optimistic, maintaining the city is not in crisis mode.
Miami-Dade County, however, has more than $1.2 billion at risk and has begun taking measures to avoid future hikes.
The instability comes as a side effect of the sub-prime lending crisis: as bond insurers’ ratings drop because of capital deficiencies, the bonds they insure look less and less desirable, scaring buyers from the market and causing interest rates to climb.
The Miami Parking Authority, a semi-autonomous arm of the city that can incur its own debt, has also seen rates jump, from an average 3.86% in January to 8% in the last week of February on a portion of its $40.6 million in bonds.
Both the city and the authority are exploring ways to escape more increases.
The higher the interest payments, the more risk of needing to dip into other resources to pay off unexpected debt.
Mr. Chircut cited securing a letter of credit or moving to a set interest rate as possible fixes.
Both are also options for the parking authority.
Chief Financial Officer Scott Simpson said he and advisors are actively exploring possibilities.
The county commission last week agreed to allow the administration to tackle the problems without coming back for approval.
The Miami City Commission has yet to discuss the issue publicly.