City Of Miami Researching Maximum Returns For 110 Million In Bonds
By Paola Iuspa
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For the next two months, Miami administrators will work with financial underwriters to gain the most out of a first round of bonds the city will issue to pay for community projects.
City officials expect to issue at least $110 million in general obligation bonds, to be paid from property tax revenues, in late July, said Albert Castillo, a city-hired bond legal consul with Squire Sanders & Dempsey. Those bonds, he said, are part of a $255 million bond program approved by taxpayers in November that are to be issued during 10 years. More bonds will be issued in 2005 and 2009, said Robert Nachlinger, assistant city manager.
J.P. Morgan, Prudential, Morgan Stanley-Dean Witter, Lehman Bros., Salomon Smith Barney and Jackson Securities make up the team of underwriters working with the city finance department to get the documentation ready by July, said Mr. Nachlinger. Leading the bond sale is Morgan Stanley, he said.
While city commissioners last week prioritized the projects to be financed through the bonds, the city still has to wait until July to get information from Miami-Dade’s property appraisal office on the size of the city’s tax base, Mr. Nachlinger said. The larger the tax base, the more collateral the city has to increase the amounts it borrows.
The current tax base is about $16 billion and, while last year it grew by 9%, this year it is expected to grow by 5%, he said. Bonds would be paid back without increasing the $1.218 per $1,000 of property-assessed value that residents currently pay to offset the city’s existing debt.
As the city gets ready to issue bonds, city administrators said they are looking into the possibility of buying an interest rate lock to guarantee the current rate, about 3.5%, for the bonds for another 30 to 60 days, Mr. Castillo said. Interest rates have been increasing lately and the higher the rate, he said, the less money the city can borrow.
City commissioners have asked to hear information about the cost of locking in its interest rates on May 23.
If the city issued the bonds two months ago at an interest rate at 3.2%, it could have borrowed about $125 million, Mr. Nachlinger said.
Money from the first round of bonds is to be used mostly for citywide projects. City Manager Carlos Gimenez said $20 million would go toward building a park in Little Haiti. The Orange Bowl is to get $16 million for remodeling and Flagami Storm Water Mitigation project is due for $10 million. The city earmarked $10 million to improve the downtown infrastructure and $3 million to redevelop Bicentennial Park. About $61 million is earmarked for neighborhoods to upgrade parks, sidewalks, roads and other quality of life elements, Mr. Gimenez said.
Mr. Nachlinger said the city has another $120 million and other projected revenues generated by utilities fees, gas taxes and fire fees that are destined to be used for capital improvements in addition to the $255 bond program.
"In total," Mr. Nachlinger said, "we will be able to spend $475 million in the next 10 years in capital improvement projects."