Loading...
LTC 114-2017 Standard & Poor's Affirmation of the City's Parking Bond RatingsMIAMI BEACH OFFICE OF THE CITY MANAGER NO. LTC # 114 -2017 LETTER TO COMMISSION TO: Mayor Philip Levine ana iviembers of he City Co j, ission FROM: Jimmy L. Morales, City Manager DATE: February 28, 2017 SUBJECT: Standard & Poor's Affirmation of e City's Parking Bond Ratings The purpose of this LTC is to advise you of the results of a positive annual review by Standard & Poor ( "S &P ") for the City's parking bonds. Miami Beach has again achieved positive annual rating reviews by S &P. This result reflects the City's strong financial performance and expected stable demand to a diverse parking system. Parking Revenue Bonds, Series 2015 and Series 2010 S &P has affirmed a rating of A+ and a stable outlook to the Parking Revenue Bonds, Series 2015 and 2010. The A+ rating, is based on a diverse parking system securing the bonds, strong historical debt service coverage at 3.17x annual debt service, adequate liquidity with unrestricted cash and investments representing 227 days' cash on hand. In S &P's view, Miami Beach's financial performance has been strong and is a key credit strength. The City's parking facilities have a high demand for transient parking, with more than 90% of parking revenues coming from transient parking. Operating revenues have increased 12.2% since 2011, whereas operating expenses have increased 37.5 %. Still, debt service coverage has remained very strong, ranging from 3.6x- 4.9x from 2011- 2015. The stable outlook on the Parking Bonds reflects the expectation that financial performance will remain stable, with at least adequate debt service coverage levels and liquidity. Although unlikely, S &P could raise the rating if demand for the parking facilities remains strong such that the City's financial performance exceeds forecast levels. Conversely, the rating could be lowered if coverage erodes significantly or if liquidity is materially drawn down to fund the parking system's capital needs. S &P considers this unlikely during the two -year outlook period. If you have any questions or need additional information, please feel free to contact me. w JLM /J AW F: \FINA \$FINANCE \Rating Agency Presentation \LTC SP Affirmation Of The City's Parking Bond Ratings.Doc RatingsDirect® Summary: City of Miami Beach, Florida; Parking Primary Credit Analyst: Anita Pancholy, Dallas (1) 214 - 871 -1402; anita,pancholy @spglobal,com Secondary Contact: Joseph J Pezzimenti, New York (1) 212- 438 -2038; joseph,pezzimenti @spglobal.com Table Of Contents Rationale Outlook WWW. STANDARDANDPOORS .COM /RATINGSDIRECT FEBRUARY 8, 2017 1 1797503 1 300417279 Summary: City of Miami Beach, Florida; Parking Credit Profile Miami Beach pkg (BAM) Unenhanced Rating A +(SPUR) /Stable Miami Beach rev Unenhanced Rating A +(SPUR) /Stable Long Term Rating A+ /Stable Many issues are enhanced by bond insurance. Rationale Affirmed Affirmed Affirmed S &P Global Ratings affirmed its 'A +' rating on the City of Miami Beach, Fla.'s parking revenue bonds outstanding. The outlook is stable. The affirmation reflects our view of the city's strong historical and pro forma financial performance and expected stable demand of what we consider to diverse parking system. We believe specific credit strengths include: • A diverse parking system securing the bonds, which includes more than 16,000 spaces distributed among nine garages and attended lots, and slightly less than 8,600 on- and off - street meters; • Strong pro forma 3.17x maximum annual debt service (MADS) coverage, based on fiscal 2016 unaudited results and excluding parking rate adjustments; and • Adequate liquidity, with unrestricted cash and investments ($16.6 million) representing 227 days' cash on hand that we expect to continue. In our opinion, offsetting credit weaknesses include: • A tourism -based economy; • Rate- setting powers that rest with the city commission, an elected body, rather than within the department; and • A $99.6 million capital improvement plan, of which 76% (or $76.3 million) have no identified funding sources Bond proceeds are financing an 874 -space multi -level parking structure that will rest above Miami Beach's new convention center. Substantial completion of the convention center will occur by June 2018. However, the city estimates the parking structure to be open by the end of 2017. Securing the bonds are net revenues of the parking system, which we consider diverse, despite not all city -owned parking facilities being pledged to the bonds because three city -owned garages have been designated as separate facilities for the pledge's purposes. A debt- service reserve funded to maximum annual debt service also secures the bonds. W W W. STANDARDANDPOORS. C OM /RATINGSDIRECT FEBRUARY 8, 2017 2 1797503 1 300417279 Summary: City of Miami Beach, Florida; Parking Miami Beach's financial performance has been strong, in our view, and is a key credit strength. The city's parking facilities have a high demand for transient parking, with more than 90% of parking revenues coming from transient parking. Miami Beach implemented system wide rate adjustments effective Oct. 10, 2015. The city's on- street metered parking hourly rate increased to $4.00 from $1.75 and monthly garage rates increased to $100 from $70. Meter hours of operation and metered parking lot hourly rates were also adjusted. Miami Beach had most recently incrementally adjusted meter rates and hours of operations in fiscal 2011, but had not changed rates generally since 2000. The city still considers rates relatively competitive given that a recent parking rate survey of 13 privately owned facilities indicated an average hourly rate of $5.00, a maximum daily rate of $30.00, and a monthly rate of $187.00, compared with $2.00, $20.00, and $100.00, respectively, at municipal garages under the new rates. Operating revenues have increased 12.2% since 2011, whereas operating expenses have increased 37.5 %. Still, debt service coverage has remained very strong, in our view, ranging from 3.6x -4.9x from 2011 -2015. Based on unaudited fiscal 2016 net revenues, we expect pro forma MADS coverage to remain strong, at 3.17x. Actual fiscal 2016 and estimated 2017 performance is lower than previously forecast from management- provided projections in 2015. Forecast, coverage was estimated at above 4.4x through 2020, but revenues in 2016 have come in lower than anticipated due to garage rate adjustments that have not fully completed, pending technology improvements. The debt structure is fairly level at $6.5 million -$6.6 million through maturity in 2045. In addition, the city's liquidity position is what we consider adequate, with total unrestricted cash on hand totaling $16.6 million based on 2015 operating expenses, and providing 227 days' cash on hand. The parking fund's 2017 -2021 capital plan totals approximately $99.6 million in capital expenditures, of which 76% (or $76.3 million) have no identified funding sources yet but will only be completed if surplus funds exist. Additionally, the parking fund has $90.9 million of previous on -going projects. There are no plans to issue debt to fund the parking system's capital needs. Most projects are paid for out of the cash or renewal and replacement fund and actual costs are not allocated in any given year. The city always seeks development teams or property sites; however, project costs are largely unknown until the timing become more immediate. Outlook The stable outlook reflects our expectation that financial performance will remain stable, with at least adequate debt service coverage levels and liquidity. Upside scenario Although unlikely, we could raise the rating if demand for the facilities remains strong such that the city's financial performance exceeds forecast levels. Downside scenario We could lower the rating if coverage erodes significantly or if liquidity is materially drawn down to fund the parking system's capital needs. We also consider this unlikely during our two -year outlook period. Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. W W W. STANDARDANDPOORS. C OM /RATINGSDIRECT FEBRUARY 8, 2017 3 1797503 1 300417279 Summary: City of Miami Beach, Florida; Parking Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com. All ratings affected by this rating action can be found on the S &P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column. W W W. STANDARDANDPOORS. COM /RATINGSDIRECT FEBRUARY 8, 2017 4 1797503 1 300417279 Copyright © 2017 by Standard & Poor's Financial Services LLC. All rights reserved, No content (including ratings, credit - related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S &P). The Content shall not be used for any unlawful or unauthorized purposes. S &P and any third -party providers, as well as their directors, officers, shareholders, employees or agents (collectively S &P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S &P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S &P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S &P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages, Credit - related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S &P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and /or clients when making investment and other business decisions. S &P does not act as a fiduciary or an investment advisor except where registered as such. While S &P has obtained information from sources it believes to be reliable, S &P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S &P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S &P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof, S &P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S &P may have information that is not available to other S &P business units. S &P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S &P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S &P reserves the right to disseminate its opinions and analyses, S &P's public ratings and analyses are made available on its Web sites, www.standardandpoors,com (free of charge), and www.ratingsdirect.com and www.globalcreditportal,com (subscription) and www.spcapitaliq.com (subscription) and may be distributed through other means, including via S &P publications and third -party redistributors. Additional information about our ratings fees is available at www, standardandpoors .com /usratingsfees. STANDARD & POOR'S, S &P and RATINGSDIRECT are registered trademarks of Standard & Poor's Financial Services LLC. W W W. STANDARDANDPOORS .COM / RATINGSDIRECT FEBRUARY 8, 2017 5 1797503 1 300417279