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Front Page » Business & Finance » Embattled Miami-Dade Expressway Authority bond ratings fall

Embattled Miami-Dade Expressway Authority bond ratings fall

Written by on February 25, 2020
Embattled Miami-Dade Expressway Authority bond ratings fall

The battle for control of five tolled Miami-Dade expressways has so impeded their future operations that a major national bond-rating agency last week downgraded $1.3 billion in expressway bonds and issued a negative outlook ahead of a March court date that could partially sort out the mess.

The battle is over the locally controlled Miami-Dade Expressway Authority, which state legislation last year attempted to shut down and replace with a state-controlled entity branded the Greater Miami Expressway Agency.

The rating, said Fitch Ratings, “takes into account the acute level of political interference into the authority’s governance and rate-setting, along with the potential for a weakened pricing framework” because of the state legislation, “which places a prolonged moratorium on rate increases.”

The impact of Fitch’s reduction of ratings on the expressway authority’s outstanding bonds from A- to BBB+, coupled with a new negative rating outlook from Fitch, is that borrowing money for future expressways construction would be more costly because interest rates would almost certainly rise.

In the construction pipeline should courts ultimately allow the Miami-Dade Expressway Authority to continue to exist is, most notably, a planned $1 billion southeastern Kendall Parkway extension of the East-West or Dolphin Expressway as the proposed solution to the east-west corridor transit bottleneck. That makes the roadway central to the county’s future transportation plans.

Fitch issued its report ahead of scheduled March 10 arguments before the 1st District Court of Appeal in the constitutional battle about the new law that seeks to make major changes in the governance of five tolled Miami-Dade expressways and the powers of whoever will oversee and operate those tollways.

The law, which passed in the last session of the Florida Legislature in spring 2019, would abolish the expressway authority. Gov. Ron DeSantis quickly appointed three new members of the planned nine-member agency that would replace the expressway authority, but the old authority quickly filed a multi-count lawsuit challenging the new law. 

Leon County Judge John Cooper then ruled in August that the new law was unconstitutional because it violated Miami-Dade’s home-rule powers.

The state has argued in appeal that the lawsuit should be dismissed, saying the Miami-Dade County Expressway Authority didn’t have the power to challenge or continue the case because the new law had dissolved it.

Judge Cooper ruled that the measure is a “local law” that violates the county’s constitutionally protected powers.

Florida House attorneys said that because the expressway system has broad economic impact and handles large numbers of drivers from across the state, the law is not merely a local law but of statewide impact.

Fitch said that its bonds downgrade to BBB+ “reflects the continued legal uncertainty surrounding the authority’s governance structure and the ambiguity in regards to strategic direction and oversight during the course of the potentially lengthy legal proceedings. The lack of clarity regarding the legal outcome and management of the expressway authority has resulted in it operating without a board of directors, thereby limiting the full functionality of operations and limiting its capital planning and investment strategy.”

Despite the impact of the March 10 hearing, Fitch wrote that it expects continued legal proceedings that may be prolonged. “There is also the possibility that the outcome of the March hearing may leave the authority without a board through fiscal year-end and thereby unable to execute or enter into contracts,” the ratings firm said.

If legal proceedings affect the authority’s liquidity or maintenance of assets, Fitch forecast, “additional rating pressure may occur” on the authority’s bonds.

Fitch said the authority had adequate liquidity, with $253 million or 526 days of cash on hand, but cited “uncertainty around the authority’s capital planning and investment strategy.”

The bill geared to dissolve the expressway authority strips away toll rate-setting autonomy through a required rate reduction and bans toll rate increases for at least five years, unless they are needed to comply with bond covenants, Fitch noted.

But, the company noted with concern, even if the bill does not ultimately take effect and the expressway authority remains in its current form, “Fitch expects rate-making flexibility to be hindered given the unprecedented level of political interference to date.”

An issued writ that will be the subject of the March 10 hearing places the expressway board in limbo, Fitch says, “making the expressway unable to move forward with new funding, contracts or projects. Additionally, the bill requires debt-financed capital projects to receive approval from the Florida Legislative Budget Commission, which could politicize capital planning. 

“Further, there are concerns that funding for the authority’s capital plan could be significantly impaired if tolls were to fall as prescribed by the bill, which could lead to greater dependence on future borrowings or a weakening of the currently strong asset maintenance regime.” 

The March hearing will not address the constitutionality of the 2019 legislation that would abolish the expressway authority. During the transitional period, the authority’s management remains in charge, but the authority has no functioning board. Management has suggested they are unable to make changes to contracts, make procurements, or issue debt, among other limitations, Fitch noted. 

Fitch said these limitations haven’t done major harm so far but “they will pose a more substantial challenge should the legal stay remain in place through the end of fiscal 2020, when the asset maintenance and roadside assistance contracts are scheduled to expire. Extension of existing contracts or procurement of new contracts would necessitate board action.”

Traffic growth on the five expressways in fiscal 2019 was moderate, increasing by 2.7% to 503.7 million transactions, Fitch notes. However, toll revenues declined by $36.4 million or 15.1% to $203.7 million.

The expressway authority, formed in 1994, has been responsible for operating, maintaining and improving the Airport Expressway (SR-112), the East-West (Dolphin) Expressway (SR-836), the South Dade (Don Shula) Expressway (SR-874), the Gratigny Parkway (SR-924), and the Snapper Creek Expressway (SR-878).

3 Responses to Embattled Miami-Dade Expressway Authority bond ratings fall

  1. Carlos Fernandez-Guzman

    February 27, 2020 at 5:24 pm

    Sad to see the dismantling and discrediting of an agency that operated without controversy or operational issues throughout its years of existence.
    The unjustified attack on MDX and home rule is despicable and unwarranted. It will historically tarnish the record of our current Dade Delegation and Governor DeSantis’ early initiatives. MDX was an exemplary transportation authority that received no state or federal revenue support and was therefore truly and fully self sufficient. Toll revenues raised from users of the system fully underwrote operations, maintenance and road expansion. No taxes were levied on non-users, it was a user-choice revenue supported system. Its investment ratings allowed it to leverage investment capital at the lowest borrowing rates and most favorable terms. It was in fact the perfect example of an agency that was not parasitic to the general tax base. What has occurred is proof of the shortsightedness of elected officials. Instead of destroying MDX, the self sufficient, user/market-funded, independently governed system should have been praised and used as a model for other applications.

  2. BFW

    February 28, 2020 at 9:57 pm

    MDX is just another self serving gold mine for the Wall Street connected P3 players and thier cronies. When the actual terms of the bonds are published, the aspirations of the politically hungry will be quashed. Much like the Marlins Stadium payback of $14 for every dollar borrowed, the public is sick of the THIEVERY.

    The Palmetto expressway was 2 lanes in each direction in the early 70’s. 50 years later the NON TOLL area at NW 103rd ST is 3 lanes, with an additional 2 toll lanes unused by anyone that lives in Dade, . The bond rating has dropped because even Wall St can see how poorly the planning and implementation was.

    Just wait to see how bad traffic will be at the I75 – NW 138 st exit. Time for another $1000 million interchange? The traffic from I75 South to 826 North was always a MAJOR problem, and was never touched by the Palmetto P3 Project. Really?

    Dade County hasn’t been able to synchronise 3 consecutive traffic lights under Gimenez. Tolls to build more toll collection arches?

    MDX is a ship of Fools that needs to be sunk by the Legislature. Stop all the out of control P3 projects and their third world bonds while we can.

    Thanks Governer De Santis

  3. Carlos R. Fernandez-Guzman

    February 29, 2020 at 2:09 pm

    Only one problem with the opinion offered by BFW, P3 projects are not part of MDX’s work plan. The funding for MDX initiatives comes from collecting user generated toll revenues and leveraging those future cash flows by borrowing from institutional or retail investors looking to earn interest on their bond portfolio investments. There are occasions where FDOT or the Federal government also participate in project funding as part of joint development of transportation solutions. Important to fully understand the subject matter before launching misleading and uninformed opinions. This is the trolling behavior that leads to creating animosity and angst about issues and initiatives that are not deserving of either. BTW BFW, the level of scrutiny the bond underwriters, investors and market exercise over each offering of debt is granular and quite substantive. This ensures the issuer has the capacity to repay and service the debt through day-to-day operations. Please look up what a P3 project is.