Just As Miami Planned To Float Bonds City Ratings Take A Hit
By Zachary S. Fagenson
Fitch Ratings knocked the City of Miami’s general obligations score down from A to A- days before the city plans to float $72.7 million worth of special obligation bonds whose proceeds are to refund a handful of existing bonds.
The ratings agency, one of a handful that rates the ability of municipal and commercial borrowers to repay their debt, cited many of the recent challenges the city faced as the cause of the downgrade.
Among them are "upcoming rulings in litigation challenging the city’s ability to impose recent wage and pension reduction," "volatile" city finances and frequent turnover in the city’s top positions, among others.
The city’s latest bond issue has been rated BBB+. An AAA from Fitch is considered prime. The city’s recent overall downgrade moves it from the upper medium grade to the lower. The BBB+ falls in that lower category.
A city spokesperson couldn’t be reached to comment on how much money the refinancing scheduled for Wednesday of this week would save the city or how Monday’s overall downgrade by Fitch would affect city finances going forward
At the end of June Fitch also downgraded two existing city bonds: a streets and sidewalks revenue bond, from A to A- and a special obligation parking revenue bond from A- to BBB+.
Fitch’s report cites some of the city’s strengths, such as diversity among health care, higher education and professional services to balance tourism and "a large international component." It warned that labor force growth outpaces available employment and that "the high 13.2% city unemployment rate continues to trend higher than that of the state and nation."
A look at the city’s general fund shows revenues fell from a peak of $490 million in 2007 to $452 million at the end of fiscal 2010.
Spending outpaced revenue during each of those years but has fallen from $529 million in 2007 to $518 million in 2010.
That pattern, combined with a reserve that fell from $125.4 million in 2005 to $4 million in 2010, were a cause of concern, Fitch said. Still, the city’s rating is higher than when Fitch first rated it BBB+ in March 2002.
Long-term concerns that could lead to future downgrades, Fitch reported, include a potential court ruling that would force the city to reinstate previous pension and wage reductions and a further decline in reserves.To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.