AUSTIN, Texas--(BUSINESS WIRE)--Fitch Ratings affirms its 'AA-' rating on the following Miami-Dade County, FL bonds:
--$82.9 million stormwater utility revenue bonds, series 1999 and 2004.
The Rating Outlook is Stable.
Bonds are secured by a first lien on net revenues of the stormwater utility, which consist of stormwater utility fees less the amount retained by the county as an administrative cost.
KEY RATING DRIVERS
STRONG COVERAGE AND LIQUIDITY: Pledged revenues after payment of a small administrative fee to the county provide over 4.0x coverage of maximum annual debt service (MADS). Liquidity is strong with $32.8 million in fund balance allocable to the stormwater utility, well in excess of annual debt service of $7.6 million.
REVENUE STABILITY: Stormwater utility charges are levied as a fixed fee on all developed property within the county and, as a result, are very stable with collections near 100% with strong enforcement provisions.
AMPLE RATE FLEXIBILITY: The system's affordable fees offer rate flexibility, although collections on the water and sewer combined bill may limit community appetite for additional rate increases given the likelihood of rate increases at those utilities.
LOW DEBT; LIMITED CAPITAL DEMANDS: Debt levels are modest on the system with short amortization. Capital needs to be funded from system revenues are limited at $25 million over the next five years. Other drainage projects are funded via the county's general obligation bonds.
PRESERVATION OF STRONG FINANCIAL PROFILE: Rating stability will be predicated on the continued strong debt service coverage levels and strong liquidity position. The county may spend down some of its fund balance for capital but liquidity is expected to remain in excess of annual debt service.
Miami-Dade County's (general obligation bonds rated 'AA' by Fitch with a Stable Outlook) stormwater system was created by county ordinance in 1991. Like other Florida municipalities, the county levies fees on properties to support its extensive stormwater and drainage system, consisting of more than 180 miles of canals, 1.6 million feet of pipe, 2.7 million feet of drains, over 80,000 catch basins, 8,000 manholes, and other assets. Fees are levied based on equivalent residential units (ERUs) and vary based on the type of developed property and number of dwelling units per parcel or developed impervious property square footage, which affect runoff to municipal drainage systems.
COVERAGE FOR BONDHOLDERS IS STRONG AND CONSISTENT
Annual debt service (ADS) coverage from pledged revenues is strong at nearly 4.0 times (x) in each of the past three fiscal years and is projected to remain in this range with level remaining debt service and no additional debt plans.
Coverage is based on collected stormwater fees minus the administrative costs of the county. Remaining revenues after payment of debt service are used to fund planning and maintenance stormwater projects completed by the public works and waste management department and permitting and sampling functions performed by the environmental resources department within the county.
Liquidity is strong. The county reports $32.8 million in cash attributable to the stormwater utility. Financial operations of the stormwater utility are not detailed in the audit on a stand-alone basis.
REVENUES ARE STABLE
The stormwater fee is included on the county's water and sewer bill, and the current fee of $4.00 per month per ERU has not changed since fiscal 2004. The county forecasts possibly raising the fee by $0.75 per ERU in fiscal 2015. However, this may not be needed at that time, depending on performance in the next few years and whether existing revenues are reserves are sufficient to fund planned capital. Fitch believes the low cost of the service and long trend of maintaining rates at the current level provide financial flexibility, although likely increases to water and wastewater rates may limit overall rate flexibility (water and sewer revenue bonds rated 'A+' by Fitch with a Stable Outlook).
Stormwater utility fee receipts, less county administrative charges in accordance with state law, must be deposited monthly to bond payment accounts. Stormwater fee nonpayment results in a property lien on parity with those related to ad valorem tax delinquencies, as well as water service shutoff, helping to ensure very strong payment rates above 98% of the annual levy.
BONDHOLDERS PROTECTED FROM DECREASE IN SERVICE AREA
Stormwater utility fees are levied on all developed property located within the utility's service area, which includes the unincorporated area of the county as well as the Village of El Portal. Since 2004 the service area has been reduced from incorporations including the City of Doral in 2005 and Miami Gardens in 2007; the county does not expect additional incorporations in the near future.
Newly incorporated municipalities may elect to be exempt from the utility, which could reduce the size of the service area. However, this should not impact coverage on outstanding revenue bonds; Miami-Dade's home rule charter and state law include provisions for protection of creditors of governmental units when boundaries are changed. This requires municipalities that incorporate to pay a pro rata share of debt service on stormwater revenue bonds outstanding at the time of incorporation. As required by county ordinance, the county will maintain responsibility for collection of stormwater utility fees in newly incorporated municipalities that exempt themselves from the utility.
MODEST CAPITAL NEEDS
Capital needs are estimated at $25.3 million over the next five years and will be funded entirely from excess operating revenues and reserves. The county notes that other drainage projects are funded with county general obligation bonds. Future capital projects are focused primarily on improvements to drainage systems, pump stations and collection facilities.
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in Fitch's U.S. Municipal Revenue-Supported Rating Criteria, this action was additionally informed by information from Creditscope.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria' (June 3, 2013);
--'U.S. Water and Sewer Revenue Bond Rating Criteria' (July 31, 2012);
--'2013 Water and Sewer Medians' (Dec. 5, 2012);
--'2013 Outlook: Water and Sewer' (Dec. 8, 2012).
Applicable Criteria and Related Research:
U.S. Water and Sewer Revenue Bond Rating Criteria
2013 Water and Sewer Medians
2013 Outlook: Water and Sewer Sector
Revenue-Supported Rating Criteria