Trio Of Ratings Signals Favorable Marlins Stadium Interest Rate
Written by Risa Polansky on May 28, 2009
By Risa Polansky
Newly announced bond ratings could set Miami-Dade up to score in the bond markets early next month when officials set out to finance a Marlins ballpark, Finance Director Carter Hammer says.
Ratings from major agencies "would place those particular financings well within" the 7.5% interest rate cap set by commissioners, he said Tuesday.
There’s no way to predict a rate until the county attempts to sell the bonds June 9 and June 10, he noted, but he called the ratings positive signs.
Moody’s Tuesday announced an "A2" rating for the county’s planned stadium bond issues backed by professional sports franchise tax revenue and has yet to issue one for bonds backed by convention development taxes.
A2 is the sixth highest of the agency’s 21 ratings.
Fitch announced Friday an A rating, the third highest on the agency’s 11-rating scale.
A memo from County Manager George Burgess late Tuesday indicates Standard & Poor’s, the third major rating agency, issued an A+ rating to bonds backed by professional sports tax revenue and an A to those backed by convention development taxes.
The agency itself had yet to announce the ratings Tuesday, but Mr. Hammer said that in general an A+ is higher than the ratings from the other agencies.
To assign bond ratings, the agencies considered the funding stream for the $633 million-plus stadium project — mainly tourism tax revenues — and the ballpark deal itself.
Though sports and tourist tax collections are down 17.6% from this time last year, with a 26% decline in May alone, Fitch says, "Fitch believes the medium- to long-term prospects for the county’s tourism sector are sound and expects tourism-related revenues to stabilize in the next several years."
Moody’s pointed out that drops in tourist tax collections now and during past economic crises are "indicative of the vulnerability and narrow pledge of this revenue source."
As far as the ballpark deal itself, "Fitch reviewed the key stadium agreements and generally views them as adequate, and risks associated with the project are viewed as equitably shared between the parties."
Both agencies note ratings are based in part on the county’s pledge of non-ad valorem revenue as a backup funding source.
The agencies point out also that the financing plan is "heavily back loaded" to allow the county to cover payments with tourism revenues.
In general, the market now is good for municipal bond issuers, said Thomas Doe, CEO of Concord, MA-based Municipal Market Advisors.
But it’s tough to predict the interest rate an A rated bond might yield, he said Tuesday, before Moody’s announced its rating and the county revealed Standard & Poor’s.
Mr. Doe said he’s seen some "A" bonds clinch favorable interest rates, but others end up with "higher than expected interest rates because the deal itself had questions, or financing for the deal was not sound."
It depends on the deal, he said, but predicted the county’s 7.5% cap "should be" achievable in today’s market.
Manager Mr. Burgess cautions in his memo that "certain hurdles remain," including a bond insurance commitment for the sports tax-backed financing and a letter of credit related to a portion of the sports tax financing that’s variable rate — "anticipated late this week."