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LTC 426-2015 Moody's Rating on the City of Miami Beach • MIAMIBEACH OFFICE OF THE CITY MANAGER _ NO. LTC # 426-2015 LETTER TO COMMISSION TO: Mayor Philip Levine and Membe t. of the City:;Commission FROM Jimmy Morales, City Manager !i; AMP DATE: November 2, 2015 ir SUBJECT: Moody's Rating on the Ci of Miami Beach, Florida Resort Tax Revenue Bonds, Series 2015, Parking Revenue Bonds, Series 2015, and the Miami Beach Redevelopment Agency Tax Increment Revenue and Revenue Refunding Bonds, Series 2015 The purpose of this Letter to Commission is to advise you of the results of a credit review done by Moody's on the City's Resort Tax Revenue Bonds, Series 2015, the Parking Revenue Bonds, Series 2015, and the Miami Beach Redevelopment Agency Tax Increment Revenue and Refunding Bonds, Series 2015 (collectively known as the Convention Center bonds). Resort Tax Revenue Bonds, Series 2015 Moody's has assigned a rating of Aa3 and a stable outlook to the Resort Tax Revenue Bonds, Series 2015. This rating of Aa3 is based on strong projected debt service coverage from the pledged resort tax. Also factored in this rating is the City's diverse local economy, with high wealth levels, satisfactory legal pledge, including a debt service reserve fund and a high level of resort taxpayer concentration, in addition to a long-term trend of positive growth in pledged revenues, with relatively few downturns. Prior rating: N/A New rating: Aa3 The stable outlook contemplates that the rating will likely remain the same through the near and mid-term, given current positive trends in the local and state economies and likely continued growth in the City's tourism sector. Parking Revenue Bonds, Series 2015 and Series 2010 Moody's has assigned a rating of A2 and a stable outlook to the Parking Revenue Bonds, Series 2005 and affirmed the A2 rating with a stable outlook to the outstanding Parking Revenue Bonds, Series 2010. Prior rating: A2 New rating: A2 The A2 rating is based on the Parking System's good debt service coverage, adequate legal protections for bond holders, and continued steady demand for parking services throughout the City. Letter to Commission Moody's Ratings November 2, 2015 Page 2 of 3 The stable outlook on the Parking Bonds reflects the strength of the enterprise, including recent parking rate increases which are projected to sustain good coverage despite some reduced system use during the Convention Center upgrades. RDA Tax Increment Revenue and Revenue Refunding Bonds, Series 2015 Moody's has assigned a rating of Al and a stable outlook to the Miami Beach Redevelopment Agency Tax Increment Revenue and Revenue Refunding Bonds, Series 2015, and affirmed the Al rating with a stable outlook on the RDA's outstanding bonds (Series 1998A, and Series 2005A & B). The Series 1998A, 2005A, and 2005B bonds will be refunded upon the issuance of the Series 2015 bonds. Prior rating: Al New rating: Al The Al rating reflects the strong tax increment in the RDA district. The rating also reflects satisfactory legal protections for bond holders and strong recent coverage which is expected to remain adequate despite this significant new money issuance. The stable outlook reflects the strength of the district and the expectation that despite near term construction in the Convention Center area, the RDA district will continue to grow in value and provide adequate debt service coverage. On the next page you will find a rating agency credit scale for your information. The Standards & Poor's rating for the above three bonds will be released within a day or so. We will send out another LTC with the S&P's ratings. If you have any questions or need additional information, please feel free to contact me. JLM:JW:ARW::j r 1►rll Letter to Commission Moody's Ratings November 2, 2015 Page 3 of 3 Rating Agency Credit Scale Moody's S&P Fitch NAIC* Aaa AAA AAA 1 Aal AA+ AA+ 1 Aa2 AA AA 1 Aa3 AA- AA- 1 Al A+ A+ 1 Investment Grade A2 A A 1 A3 A- A- 1 Baal BBB+ BBB+ 2 Baa2 BBB BBB 2 Baa3 BBB- BBB- 2 Bal BB+ BB+ 3 Ba2 BB BB 3 Ba3 BB- BB- 3 B1 B+ B+ 3 Non Investment Grade B2 B B 3 B3 I B- I B- f 3 FAssociation of Insurance Commissioners ! HOOKY'S INVESTORS SERVICE New Issue: Moody's assigns Aa3 rating to Miami Beach (FL) resort tax revenue bonds; outlook is stable Global Credit Research-29 Oct 2015 Affects $207.6 million in new debt MIAMI BEACH (CITY OF)FL Cities (including Towns,Villages and Townships) FL Moody's Rating ISSUE RATING Resort Tax Revenue Bonds, Series 2015 Aa3 Sale Amount $207,600,000 Expected Sale Date 11/02/15 Rating Description Special Tax: Sales Moody's Outlook STA(m) NEW YORK, October 29,2015--Moody's Investors Service has assigned a Aa3 rating to the city of Miami Beach's (FL)$207.6 million Resort Tax Revenue Bonds, Series 2015.The stable outlook applies to the Resort Tax Revenue Bonds SUMMARY RATING RATIONALE The assignment of Aa3 reflects strong projected debt service coverage from the pledged resort tax.While the tax is off of a narrow economic base,which is reflected in the one-notch distinction with the city's Aa2 general obligation bond ratings,tourism represents an outsized component of the county's local economy. Underscoring the resiliency of the pledged revenues, in the past 15 years resort tax revenues have grown by a 7.7% compounded annual rate, declining in 2 years only, and in each case the decline was followed by a strong increase in revenue.Also factored in the rating is the city's diverse local economy,with high wealth levels, satisfactory legal pledge, including an additional bonds test equal to 1.5 times maximum annual debt service (MADS)and a high level of resort taxpayer concentration. OUTLOOK The stable outlook contemplates that the rating will likely remain the same through the near-and mid-term,given current positive trends in the local and state economies and likely continued growth in the city's tourism sector. WHAT COULD MAKE THE RATING GO UP -Further significant growth in the pledged revenue with few annual declines -An upgrade in the city's general obligation rating WHAT COULD MAKE THE RATING GO DOWN -Significant decline in the local economy affecting tourism -Trend of decreasing resort tax revenue with attendant declines in debt service coverage STRENGTHS -Strong local economy that is highly dependent on tourism -Long-term trend of positive growth in pledged revenues,with relatively few downturns -Strong debt service coverage of projected maximum annual debt service CHALLENGES -The resort tax remains narrow in scope and subject to declines in hotel occupancy and restaurant receipts from external shocks,like a hurricane or domestic terrorism,or from secular declines in tourism to South Florida. -High level of concentration among"hotel"taxpayers RECENT DEVELOPMENTS Recent developments are incorporated in the Detailed Rating Rationale DETAILED RATING RATIONALE TAX BASE AND NATURE OF PLEDGE: LARGE LOCAL ECONOMY WITH HIGH DEPENDENCY ON TOURISM The Miami Beach economy,while largely dependent on tourism, is also an integral part of the greater Miami-Dade local economy,which includes a resurgent city of Miami(Al stable)that is experiencing a strong real estate boom. The county's very sizable economic base is well-diversified by the tourism,trade, banking, health care, construction, business services and manufacturing industries.The airport, a primary entry point for Latin American and Caribbean visitors, and seaport,with the largest multi-day cruise port in the world, remain major economic engines. Nonetheless,tourism remains the dominant economic driver for the city. As of the end of 2014,the city reports that it had 17,751 hotel rooms. By June 2016,the city estimates that this number will increase by approximately 11%.Occupancy rates are healthy, averaging around 77%in 2014, according to the city,which compares favorably to a 65.1%occupancy rate in the US(for 2015).According to the city,of the 14.5 million visitors to the area in 2014,48%stayed overnight in the city and 75%visited the city during their stay. The city's resort tax,which is currently a 3%charge on any short-term lodging and a 2%charge on all sales of food and beverage in the city, receipts reflect the robust growth and resiliency of tourism.The city is adding an additional 1%charge on the hotel portion of the tax.Since 2000,the growth rate of aggregate resort tax revenue has been 7.7%annually.This growth rate include 2 years in which resort revenues suffered a decline, 11.2%in 2002 and 1.8%in 2009.These declines also coincide with the after-effects of the September 11, 2001 terror attacks and the worst recession in nearly 60 years. But, in each case, resort tax revenue resumed growing in the subsequent year. The"hotel"taxpayer concentration is substantial,with 39%of the hotel portion of the resort tax concentrated in the top 10 taxpayers, a credit negative factor given the rating level. Given that 57%of the resort tax is represented by the hotel tax,the actual level of concentration is approximately 22%,which is a still substantial level of concentration. While the city's population is modest at 91,026, making it the 23d largest in the state, its tax base is extremely large at approximately$30.6 billion.At this level,the tax base translates into a very strong$337,000 per resident. Positively, even with the recession,the city's tax base now exceeds its pre-recession levels by nearly 18%.The city's employment picture is better than the state and the rest of the US.The low unemployment rate of 4.7%is lower than both the state and US,which are at 5.7%and 5.6%, respectively as of July,2015.The 52,693 employed persons now greatly exceeds the 46,196 figure at the pre-recession peak in 2007. Finally,while the city's median family income is relatively weak at 82.4%of the US median, per capita income is far higher than that of the US,at 149.5%of the US's PCI. DEBT SERVICE COVERAGE AND REVENUE METRICS: STRONG DEBT SERVICE COVERAGE Debt service coverage on the series 2015 bonds will be strong.The bonds will begin amortizing in 2016,with a planned December 1 principal payment date.The maturity date is scheduled for 2045. Projected debt service is level,with maximum annual debt service at approximately$13.7 million.There is no outstanding debt against which the revenue tax is secured. Given recent performance in resort tax revenues, MADS coverage in fiscal 2015 would have been 4.9 times. Using a five-year average of resort tax revenue,coverage would average 4.1 times MADS. Importantly,these calculations do not include the additional revenue produced by the additional 1%tax on lodgings that will go into effect in calendar 2015. Liquidity Liquidity is not a major factor in the methodology. LEGAL COVENANTS:ADEQUATE LEGAL PROTECTIONS Legal protections include a first lien on the pledged revenues and a prohibition against the city from issuing additional bonds on parity with the series 2015 bonds unless the amount of resort tax revenues exceed 150%of MADS. Furthermore,the city covenants to levy the resort tax at the current rate for as long as the bonds remain outstanding. MANAGEMENT AND GOVERNANCE The city's resort tax is collected by the proprietor/manager of each hotel or restaurant and remitted to the city on a monthly or annually basis, depending upon the amount collected. KEY STATISTICS -Assessed Value(Full Value), Fiscal 2016: $30.6 billion -Median Family Income as %of US Median(2013 American Community Survey): 82.4% -2014 population(Florida Statistical Abstract,2013):91,026 -Fiscal 2015 Pledged Revenues: $67.3 million -Additional Bonds Test: 150%pledged revenues over MADS -Debt Service Reserve Requirement:TBD OBLIGOR PROFILE The city of Miami Beach is located in Miami-Dade County (Aa2 negative). LEGAL SECURITY As discussed earlier,the bonds are secured by a first lien on the city's resort tax revenues,which will include a 4%tax on hotel/transient lodgings and a 2%tax on food and beverage sales at restaurants.Approximately 57%of resort tax revenues currently come from the hotel tax. USE OF PROCEEDS Bond proceeds will be used to finance improvements to the city's convention center. PRINCIPAL METHODOLOGY • The principal methodology used in this rating was US Public Finance Special Tax Methodology published in January 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class of debt,this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider,this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable,the related rating outlook or rating review. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Analysts Gregory W. Lipitz Lead Analyst Public Finance Group Moody's Investors Service Valentina Gomez Backup Analyst Public Finance Group Moody's Investors Service Julie Beglin Additional Contact Public Finance Group Moody's Investors Service Robert Azrin Additional Contact Public Finance Group Moody's Investors Service Contacts Journalists: (212)553-0376 Research Clients: (212)553-1653 Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA MOODY'S INVESTORS SERVICE ©2015 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc.and/or their licensors and affiliates (collectively, "MOODY'S").All rights reserved. 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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. • MOODY'S INVESTORS SERVICE New Issue: Moody's assigns A2 and stable outlook to Miami Beach's (FL) $64M Parking Revenue Bonds, Ser. 2015 Global Credit Research-29 Oct 2015 Affirms A2 on$37.8 million in outstanding parity debt MIAMI BEACH (CITY OF)FL PARKING ENTERPRISE Parking FL Moody's Rating ISSUE RATING Parking Revenue Bonds Series 2015 A2 Sale Amount $64,000,000 Expected Sale Date 11/10/15 Rating Description Revenue:Government Enterprise Moody's Outlook STA NEW YORK, October 29,2015--Moody's Investors Service has assigned an A2 and stable outlook to City of Miami Beach's (FL)$64 million Parking Revenue Bonds, Series 2015. Concurrently,we have affirmed the A2 rating and assigned a stable outlook to$37.8 million in outstanding parity debt. SUMMARY RATING RATIONALE The A2 rating is based on its good debt service coverage,adequate legal protections for bond holders,and continued steady demand for parking services throughout the city. OUTLOOK The stable outlook reflects the strength of the enterprise, including recent parking rate increases which are projected to sustain good coverage despite some reduced system use during Convention Center upgrades. WHAT COULD MAKE THE RATING GO UP -Growth in coverage from increased parking rates or demand WHAT COULD MAKE THE RATING GO DOWN -Declines in coverage due to reduced demand STRENGTHS -Strong debt service coverage -Recent rate increases throughout system -Healthy demand throughout system CHALLENGES -Near term construction which could impact revenues -Competition from private sector RECENT DEVELOPMENTS Recent developments are contained within the Detailed Rating Rationale. DETAILED RATING RATIONALE SERVICE AREA AND CUSTOMER BASE:STRONG TOURISM MARKET AND GROWING TAX BASE The system serves the entire City of Miami Beach(GO rated Aa2).The system contains 10,196 metered spaces on streets and in off-street lots as well as 10 garages with 6,079 spaces.The 16,275 parking spaces have grown primarily through the construction of additional parking garages on existing lots. Private parking garages and lots are located throughout the city and compete with the municipal spaces, but City management targets its rates at levels 10%-20%lower than those for private facilities to remain competitive. Going forward,demand for the system's facilities is expected to remain positive as the city redevelops the Convention Center downtown and other tourism-related development continues.The Convention Center redevelopment will add an 847-space garage in 2018.The strong demand for the city's parking facilities coupled with the lack of significant private competition are central factors in Moody's rating. The city's tax base continues to rebound from the housing bust and exhibits strong growth.Assessed value grew 13%in 2016 to$30.6 billion, surpassing the prior high of$27.2 billion in 2008 before the recession. Building permits are also above their pre-recession high, indicating additional future growth, primarily driven by tourism. Full value per capita is very strong due to the large hotel and commercial presence at$405,006. The city's economy is focused on tourism and maintains an established national and international identity that contributes to high-quality tax base development.Approximately 1,800 hotel rooms will be added in 2015,with an additional 186 planned for 2016.The number of people visiting Miami Beach, including day visits, increased 39% from 2010 to 10.9 million in 2014.We believe the city's strong tourism economy will continue to grow and demand for parking will remain strong. DEBT SERVICE COVERAGE AND NET WORKING CAPITAL:STRONG DEBT SERVICE COVERAGE WITH RECENT RATE INCREASES Debt service coverage is expected to remain strong due to rate increases implemented in October 2015. Revenues are primarily derived from meters (58%of 2014 revenues),garages (20%), and parking citations (7.3%). Remaining revenues consist of various permits, preferred lots and towing revenues. Management raised rates effective October 12, 2015 at metered spaces, lots and garages throughout the city and projects revenues to increase by$22 million annually beginning in fiscal 2016. Debt service coverage in 2014 was a strong 3.71 times, down from fiscal 2011-2013,when coverage averaged just under 5.0 times.The decline was due primarily to some parking facilities being offline for renovation or repaving. Unaudited 2015 coverage declined moderately to 3.55 times due primarily to increased expenses. Projected pro-forma 2016 coverage, incorporating the recent rate increases and the current debt issuance, is 4.98 times, closer to historical averages. Notably,the system does make annual transfers to the city's general fund.An administrative fee to cover management expenses paid out of the general fund totaled$1.9 million in 2014 and is projected at$1.7 million in 2015.While this fee is subordinate to debt service, coverage in 2014 would decline to 3.25 times inclusive of this administrative fee.Additionally,the city budgets annually to transfer additional parking fund surpluses into the general fund. In 2014,this transfer totaled$8.4 million.While these transfers are also subordinate to debt service, coverage in 2014 inclusive of this transfer would drop to 1.16 times. Both the administrative fee and the additional annual transfer are expected to continue, however, management has flexibility to reduce these amounts.While we expect transfers to the general fund to continue,we do not expect them to be a pressure on the enterprise. At fiscal year-end 2014,the parking fund maintained an unrestricted net position of$59.7 million, or 234%of operating expenses excluding transfers or 164%of operating expenses including all general fund transfers.The city has a policy of maintaining a reserve of 11%of operating expenses plus a 6%emergency contingency in all enterprise funds.The city also maintains a separate parking impact fee fund for future capital expansion projects. Parking impact fee fund revenues are exclusively fees from construction projects which don't provide adequate parking during the construction process. Revenues totaled$2.5 million in 2014 and the fund currently maintains a balance of$12.6 million. Liquidity The parking fund's 2014 year-end cash balance was a very strong$55.9 million or almost 800 days cash on hand. The parking impact fee fund includes an additional$12.6 million in cash. DEBT AND LEGAL COVENANTS:ADEQUATE LEGAL PROVISIONS Pledged revenues are net revenues of the parking system,excluding three separate parking facilities located at 5th Street and Alton Rd, 7th Street and Collins Avenue,and at 16th Street between Collins Avenue and Washington Avenue. (Revenues from these facilities are excluded from coverage ratios above.)Bond covenants provide satisfactory security to bondholders, including a rate covenant that requires that net revenues of the system provide at least 1.35 times coverage of annual debt service.The additional bonds test equals 1.5 times coverage of maximum annual debt service(MADS)for 12 consecutive months out of the last 18,or 1.1 times MADS for 12 consecutive months out of the last 18 and projected net revenues equal to 1.5 times MADS. Previously issued bonds require a debt service reserve fund at MADS.The debt service reserve is currently cash funded, but the city has the option to fund it with a surety.The current issuance has no reserve requirement.The system has an open-loop flow of funds. No additional debt is anticipated in the near term. Debt Structure All debt is fixed rate and amortizes over the long term. Debt-Related Derivatives The parking enterprise does not have any exposure to derivatives. MANAGEMENT AND GOVERNANCE The parking enterprise is managed by the city.The city council has full rate-setting authority. Management is generally conservative and has run significant surpluses in the parking enterprise fund in recent years. KEY STATISTICS -Parking:6,079 garage spaces, 10,196 metered spaces -Net Revenues,fiscal 2014:$40 million -Debt Service Coverage, by bond ordinance,fiscal 2014: 3.71 times -Debt Service Coverage,fiscal 2014(inclusive of General Fund transfers): 1.16 times -Debt Service Coverage, by bond ordinance,fiscal 2015(unaudited):3.55 times -Debt Service Reserve Fund: -Series 2010A&B: cash funded at MADS(can be surety funded) -Series 2015: No DSRF requirement -Rate covenant: 1.35 times -Additional bonds test: 1.5 times OBLIGOR PROFILE The parking enterprise serves the City of Miami Beach and contains 16,275 spaces. LEGAL SECURITY The bonds are secured by net revenues of the city's parking system. USE OF PROCEEDS Proceeds will be used to pay for various parking projects related to renovations at the city's Convention Center. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Generic Project Finance Methodology published in December 2010.An additional methodology used in this rating was US Local Government General Obligation Debt published in January 2014. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class of debt,this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider,this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned,and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable,the related rating outlook or rating review. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Analysts Valentina Gomez Lead Analyst Public Finance Group Moody's Investors Service Julie Beglin Additional Contact Public Finance Group Moody's Investors Service Gregory W. Lipitz Additional Contact Public Finance Group Moody's Investors Service Contacts Journalists: (212)553-0376 Research Clients: (212)553-1653 Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA MOODY'S INVESTORS SERVICE ©2015 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc.and/or their licensors and affiliates (collectively, "MOODY'S").All rights reserved. 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MOODY'S INVESTORS SERVICE New Issue: Moody's assigns Al and stable outlook to Miami Beach RDA's (FL) $343M Tax Increment Revenue and Revenue Refunding Bonds, Ser. 2015A&B Global Credit Research-29 Oct 2015 Affirms Al and assigns stable outlook to outstanding parity debt MIAMI BEACH (CITY OF)FL Cities(including Towns,Villages and Townships) FL Moody's Rating ISSUE RATING Tax Increment Revenue and Revenue Refunding Bonds, Series 2015B(City Center/Historic Al Convention Village) Sale Amount $37,340,000 Expected Sale Date 11/10/15 Rating Description Tax Allocation/Tax Increment Tax Increment Revenue and Revenue Refunding Bonds,Taxable Series 2015A(City Center/Historic Al Convention Village) Sale Amount $306,045,000 Expected Sale Date 11/10/15 Rating Description Tax Allocation/Tax Increment Moody's Outlook STA(m) NEW YORK, October 29, 2015--Moody's Investors Service has assigned an Al and stable outlook to Miami Beach Redevelopment Agency's(FL)$343 million Tax Increment Revenue and Revenue Refunding Bonds, Series 2015A&B.Concurrently,we have affirmed the Al rating and assigned a stable outlook to$55 million of Redevelopment Agency(RDA)in outstanding parity debt. SUMMARY RATING RATIONALE The Al rating reflects the strong recent debt service coverage and economically vibrant tax increment district in Miami Beach's art deco neighborhood.The rating also factors in satisfactory legal protections for bond holders and the high taxpayer concentration in the district. OUTLOOK The stable outlook reflects the strength of the district and the expectation that despite near term construction in the Convention Center area,the district will continue to grow in value and provide adequate debt service coverage. WHAT COULD MAKE THE RATING GO UP -Continued growth in the district which increases debt service coverage ratios WHAT COULD MAKE THE RATING GO DOWN -Significant reduction in the incremental assessed values -Significant weakening of debt service coverage STRENGTHS -Adequate debt service coverage despite significant new money issuance -Mature district with vibrant and growing tourism aspect CHALLENGES -Significant new debt issuance -Concentration by the ten largest taxpayers -Millage reduction by taxing entities RECENT DEVELOPMENTS , Recent developments are incorporated in the Detailed Rating Rationale. DETAILED RATING RATIONALE ECONOMY AND TAX BASE: LARGE, STRONG TAX INCREMENT DISTRICT RELIANT ON TOURISM The area covers 50 city blocks (332 acres)and is partly within and partly adjacent to the city's Art Deco District. It is bounded to the east by the Atlantic Ocean.The tax base is concentrated with hotel properties and also contains various retail and commercial businesses, including the Lincoln Road shopping area,and the Miami Beach Convention Center.The ten largest taxpayers, including six hotels,comprise 25%of the increment area posing some concentration risk. Five of the City of Miami Beach's (GO rated Aa2)top ten taxpayers are within the district. Incremental assessed valuations have more than doubled since 2006,despite the recession,from$1.9 billion to $4.5 billion in 2016. The tax increment base year is 1992;the base value is $292 million.The fiscal 2016 increment represents 94%of the district and 14%of the entire city.The increment base outperformed the city wide tax base during the recession,with declines in 2010 and 2011 of 9%and 2.1%, respectively.Growth in 2015 was 8.8%and 2016 preliminary numbers indicate an increase of 16.3%. The city's economy is focused on tourism and maintains an established national and international identity that contributes to high quality tax base development.Approximately 1,800 hotel rooms will be added in 2015,with an additional 186 planned for 2016.The number of people visiting Miami Beach, including day visits, increased 39% from 2010 to 10.9 million in 2014. Convention Center renovations are expected to begin in December 2015 and are funded in part with the current issuance.The Convention Center will remain at least partially open during the renovations and will continue to host events, including the marquee Art Basel.We do not expect construction to negatively affect values in the surrounding parts of the area. DEBT SERVICE COVERAGE AND REVENUE METRICS:ADEQUATE COVERAGE PROVIDED BY REVENUES The agency is expected to maintain solid debt service coverage given current and expected growth in the area over the near-term.The agency receives its revenues in the beginning of each calendar year(January 1)for payment of debt service on the bonds in March and September.The taxing authorities which contribute to the RDA are City of Miami Beach(55.5%of 2014 revenues)and Miami-Dade County(GO rated-Aa2 negative outlook) (44.5%of revenues).The amount paid equals 95%of incremental ad valorem taxes levied less the amount that would have been generated by the current millage rate on the base value. Notably, both the City and County have been reducing their millage rates as assessed values rebound.The City has reduced its millage rate slightly each year since 2011, including a reduction from 5.7942 mills in 2015 to 5.7068 mills in 2016.The County reduced its rate from 4.7035 mills to 4.6669 mills in 2015, but did not change the rate in 2016. Despite millage reduction,total tax increment revenues have increased every year since 2012. Since 2006,the agency has seen positive incremental tax revenue growth in most years (except 2008,2010 and 2012). Recent increases averaging 7.3%annually during the last three years through 2015.Overall, revenues have grown to a high of$36.3 million in fiscal 2015 providing for post-issuance MADS coverage of 1.58 times. Management projects a 23.2%increase in revenues in 2016,which would increase MADS coverage to 1.95 times. Utilizing conservative projections, management expects MADS coverage to be in excess of 2.0 times beginning in • 2017. v v Liquidity Liquidity in not a major factor in our assessment of tax increment bond credit quality. DEBT AND LEGAL COVENANTS: MANAGEABLE DEBT PROFILE AND ADEQUATE LEGAL PROVISIONS The debt profile is expected to remain manageable despite the large current issuance. Post-refunding,the Series 2015A&B bonds will be the only bonds outstanding for the RDA. Legal provisions for the bonds are satisfactory.The debt service reserve requirement is the lesser of i)MADS, ii) 125%of average annual debt service, or iii) 10%of the proceeds of the bonds. Management expects to fund it with a surety.The additional bonds test is 150%of MADS. Debt Structure All of the RDA's debt is fixed rate and amortizes over the long term. Debt Related Derivatives All of the agency's debt is fixed rate and the agency is not party to any derivative agreements. Pensions and OPEB Pensions and OPEB liabilities are not a factor in our assessment of this credit. KEY STATISTICS -Median family income as a%of US: 94% - Incremental AV:$4.5 billion -Top ten taxpayers'AV as a%of incremental AV:25.1% -Ratio of incremental AV to total AV:93.9% -MADS Coverage(unaudited 2015, post-issuance): 1.58 times -3 year CAGR of tax increment revenues: 13.5% -Additional Bonds Test(Open Lien): 1.50x OBLIGOR PROFILE The Miami Beach RDA area was created in 1993 and consists of 332 acres from 24th Street south to 14th Lane and West Avenue east to the Atlantic Ocean.The Area was created to rehabilitate and redevelopment properties within the area. LEGAL SECURITY The bonds are secured by Trust Fund revenues (Tax Increment Revenues)derived from the 332-acre Miami Beach Redevelopment Area and received by the Redevelopment Agency. USE OF PROCEEDS Proceeds will be used to refund$49.4 million in outstanding Series 1998A, Series 2005A and Series 2005B bonds for net present value savings of 6.1%of refunded bonds.The remaining$291.6 million will be used to renovate the Convention Center and other RDA projects. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Tax Increment Debt published in June 2015. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES For ratings issued on a program,series or category/class of debt,this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider,this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable,the related rating outlook or rating review. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Analysts Valentina Gomez Lead Analyst Public Finance Group Moody's Investors Service Gregory W. Lipitz Additional Contact Public Finance Group Moody's Investors Service Robert Azrin Additional Contact Public Finance Group Moody's Investors Service Contacts Journalists: (212)553-0376 Research Clients: (212)553-1653 Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA MOODY'S INVESTORS SERVICE ©2015 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc.and/or their licensors and affiliates (collectively,"MOODY'S").All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC.AND ITS RATINGS AFFILIATES ("MIS")ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS,OR DEBT OR DEBT-LIKE SECURITIES,AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY.CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE,AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE,SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL,WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED,TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD,OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided"AS IS"without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including,when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody's Publications. To the extent permitted by law, MOODY'S and its directors,officers, employees,agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect,special,consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information,even if MOODY'S or any of its directors,officers,employees,agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a)any loss of present or prospective profits or(b)any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S. To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence(but excluding fraud,willful misconduct or any other type of liability that,for the avoidance of doubt, by law cannot be excluded)on the part of,or any contingency within or beyond the control of, MOODY'S or any of its directors,officers,employees,agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information. NO WARRANTY, EXPRESS OR IMPLIED,AS TO THE ACCURACY,TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Moody's Investors Service, Inc.,a wholly-owned credit rating agency subsidiary of Moody's Corporation("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds,debentures, notes and commercial paper)and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any rating,agreed to pay to Moody's Investors Service, Inc.for appraisal and rating services rendered by it fees ranging from$1,500 to approximately$2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading"Investor Relations—Corporate Governance—Director and Shareholder Affiliation Policy." For Australia only:Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569(as applicable).This document is intended to be provided only to"wholesale clients"within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia,you represent to MOODY'S that you are, or are accessing the document as a representative of, a"wholesale client"and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to"retail clients"within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for"retail clients"to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser. For Japan only: MOODY'S Japan K.K. ("MJKK")is a wholly-owned credit rating agency subsidiary of MOODY'S Group Japan G.K.,which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ")is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization("NRSRO").Therefore,credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently,the rated obligation will not qualify for certain types of treatment under U.S.laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner(Ratings)No. 2 and 3 respectively. MJKK or MSFJ (as applicable)hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper)and preferred stock rated by MJKK or MSFJ (as applicable)have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable)for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000. MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.