Loading...
LTC 11-2003 CITY OF MIAMI BEACH Office of the City Manager Letter to Commission No. To: FFOB: Subject: Mayor David Dermer and Date: January 15, 2003 Members of the City Commission Jorge M. Gonzalez~ .,~,.~'" City Manager (/" ~.) UPGRADE OF CITY'BOND RATING FROM STANDARD & POOR'S I am pleased to advise you that Standard & Poor's has upgraded their rating on the City's bonds from an A to an A+. This is a significant accomplishment for the City of Miami Beach and reflects continuing efforts to improve our financial position by all of you, the Administration and particularly by our Chief Financial Officer, Trish Walker. Further, this upgrade brings our Standard & PooCs rating in line with the A1 rating received from Moody's during Fiscal Year 2001. Both ratings are the highest to be achieved by the City during its history. The rating report indicates the upgrade was as the result of a number of factors which included "sustained strong financial per[ormance bolstered by long term planning and formal fiscal policies." This upgrade is particularly significant because of its timing. Standard and Poors advises that during the year following September 11, most states and many cities experienced financial difficulties, especially those whose economies are largely dependent on tourism revenues. Further, they acknowledged that the City of Miami Beach successfully navigated those challenging economic times because of prudent fiscal policy and management, diversification of the economic base and continued growth. Particular mention is made of the City's contingency fund for emergencies along with the strength of reserves in City's enterprise funds. It was also noted that the City hosts high profile events, such as MTV's inaugural Latin America Video Music Awards, "which should continue to positively impact hotel occupancy rates and prices, resort tax revenues and overall tourism trends." Additionally, the report reflects the City's strong ongoing economic growth and diversification of its tax base. A copy of the rating report has been attached for your review. We have extended an invitation to Standard & Poo¢s analysts for a site visit to Miami Beach prior to the sale of our General Obligation Bonds which is planned for late spring or early summer 2003. JMG/PDW [26:Dec-2:002] Miami Beach, Florida; Tax Secured, General Obligation Page 1 of 3 Research: -Miami Beach, Florida; Tax Secured, General Obligation Publication date: 26-Dec-2002 Credit Analyst: Baltazar Juarez, New York (1) 212-438-7999; Karl Jacob, New York (I) 212-438-2111 Credit Profile UPGRADED $11.900 mil. Miami Beach GO bnds (Pk Imp Projs)ser 1996 dtd 10/01/1997 due 09/01/1998-2007 To From AAA/A+(SPUR) A OUTLOOK: STABLE Return to Reaular Format ~-~Rationale The Standard & Poor's underlying rating (SPUR) upgrade on Miami Beach, Fla.'s GO bonds (park improvement projects) series 1996 to 'A+' from 'A' reflects sustained strong financial performance along with strong ongoing growth and diversification in the tax base. The rating further reflects: · A local economic base centered in tourism that benefits from its location and participation in the greater Miami metropolitan area, · A large tax base that exhibits no taxpayer concentration and has experienced strong growth over the past decade, · Strong financial performance'and position, and · Wealth levels near state and national averages. These factors are partly offset by: · A high debt burden; · A high unemployment rate of 8.62% as of August 2002; and · An economic base that continues to diversify (particularly in the areas of health care and the entertainment industry) but still remains highly dependant on the tourism industry, and, as such, remains more susceptible to economic fluctuations. The bonds are secured by the city's full faith and credit GO pledge. Miami Beach is comprised of a seven-mile-long barrier island and a number of smaller natural and man-made islands in southern Florida, across the Biscayne Bay from Miami. The city encompasses 7.1 square miles. Its year-round population is 87,933; however, the city receives about 7.5 million visitors annually. The city's local economic base remains centered in tourism but continues to diversify with a growing health care and entertainment industry presence. In the tourism/hospitality sector, leading employers include the Fontainbleau Hilton (1,200 employees) and Loews Miami Beach Hotel (800). in the health care sector, leading employers include Mount Sanai Medical Center (2,776 employees), South Shore Hospital (850), and Miami Heart Institute (768). In the entertainment industry, Sony Music International and MTV Latin America are the leading employers. Employment figures for entertainment industry-related employers range from 103 to 225; however, their economic impact is significant. In 2002, for example, MTV held its inaugural Latin America Video Music Awards in Miami Beach. This, along with other high profile events that the city has hosted (which attract significant number of visitors) should continue to positively impact hotel occupancy rates and prices, resort tax revenues, and overall tourism trends. The city's labor force now totals 46,900, while employment is at 42,800. The city experienced an uptick in the unemployment rate over the past year, partly due to decreased tourism following Sept. 11 and a ~e://C:~D~cuments%2~and%2~Settings\fmawa~L~ca~%2~Settings\T~m~ary%2~nt~rn~t%2~F~es\~L~ 01/15/2003 [26.43ec-2002] Miami Beach, Florida; Tax Secured, General Obligation slowdown in the national economy. Unemployment peaked at 9.71% in November 2001 before beginning to gradually decrease. As of August 2002, unemployment was 8.62%. At this rate, however, the city's August 2002 unemployment rate was well above the state's 5.44% and the nation's 5.58%. The city's wealth and income levels are near state and national averages. Per capita effective buying income ($18,859)is 103% of the state and 102% of the nation. The city's tax base is large, exhibits no taxpayer concentration, and has increased at a strong rate over the past decade. Assessed value (AV) now totals $10.6 billion, or a high $102,092 per capita market value. Growth in AV has been strong, with an average annual increase of 9.9% since fiscal 1998. Growth in the tax base has been fueled by significant residential and commercial construction. For fiscal 2001, management stated that the city saw $573 million resulting from new construction building permits. For fiscal 2002, through September, this figure is at $650 million. As part of this construction, management has indicated that about 400,000 square feet of new office space has been added over the past year, which represents an increase of about 20% in the office inventory. Presently, office vacancy rates are high at about 17%-18%. This rate, however, is expected to decrease as the new inventory is leased out. Additionally, growth in the base is expected to continue at a brisk pace, as several projects are planned or ongoing. There is no concentration in the tax base, with the 10 leading taxpayers accounting for 5.0% of AV. Tax collections are also strong, with the current-year collection rate at about 100%. I~Outlook The stable outlook reflects the expectation of continued strong financial performance and position, along with ongoing economic growth and diversification. The outlook also reflects the expectation that debt burden will remain manageable going forward. ~FinanceslDebt The city's financial performance and position remains strong, bolstered by long-term planning and formal fiscal policies. Audited general fund results for fiscals 1998-2001 indicate consecutive surpluses, while general fund reserves have steadily increased. At fiscal year ending Sept. 30, 2001, the general fund posted a surplus of $1.2 million. The ending general fund balance totaled $27.9 million. The unreserved portion totaled $25.1 million, or a strong 20.4% of expenditures. This compares to an unreserved general fund balance of $24.5 million, or 22.2% of expenditures, for fiscal 2000. Included in the unreserved general fund balance is the city's contingency for emergencies, which, by policy, is to be maintained at a minimum of 11% of the following year's general fund budget. At the close of fiscal 2001, contingency for emergencies totaled $14.2 million and increased to $15.7 million in fiscal 2002. The city has additional financial flexibility, with reserves in its enterprise parking system fund. In fiscal 2001, this fund had an unreserved general fund balance of $43.2 million, or 30% of general fund expenditures. For fiscal year ending Sept. 30, 2002, management has indicated that the general fund expects to post a modest surplus. Due to a slowing national economy and the events of Sept. 11, management reduced expenses-mainly in culture and recreation-in fiscal 2002. Management also implemented limited hiring. The ending unreserved general fund balance is expected to be in line with the previous year. Annually, the city transfers in funds from the special revenue fund with revenues dedved from the city's resort tax. In fiscal 2001, $11.6 million was transferred into the general fund. For fiscal 2002, management estimates resort tax revenues at $21.4 million--down by 9.8% from the previous year. The fiscal 2003 general fund budget totals $158.6 million and is balanced. The budget is up 12.14% from the previous year's budget. The general operating property tax rate remains the same as the previous year's at $7.299 per $1,000 of AV. The debt service mill rate totals $1.023 mills per $1,000 of AV--down from $1.077 mills from the previous year. Resort tax revenues, which are included in the special revenue fund, are estimated at $23.0 million--up 7.5% from fiscal 2002. The city's debt burden (including tax increment and overlapping debt) is high at $4,169 per capita and moderate at 3.5% of market value. The city's debt burden (excluding tax increment debt supported by tax increment revenues from the city and county, and a portion of the city's resort tax) is still high at $2,992 on a per capita basis and Iow at 2.5% of market value. Amortization is slower than average, with 43% of outstanding principal retired within 10 years, 93% in 20 years, and 100% by 2023. Debt service carrying charges over the past four fiscal years have been above average. In fiscal 2000, carrying file://C:XDocuments%20and%20S ettings\fmawalpXLocal%20Settings\Temporary%20Internet%20Files\OL'" Page 2 of 3 01/15/2003 [26.t)ec~2092] Miami Beach, Florida; Tax Secured, General Obligation Page 3 o£3 charges totaled 21% of the combined general and debt service fund expenditures. In fiscal 2001, carrying charges were higher, as the city replaced $32 million of variable-rate debt with fixed-rate debt. The city's fiscal 2003-2007 capital improvement plan totals $310.8 million. The bulk of the plan ($207 million) is for public works projects. Many of the projects identified are ongoing projects and are being funded by past bond issues. As part of the funding for the plan, in the spring or summer of 2003 the city plans to issue $30 million to $35 million in GO bonds for various capital projects. Copyright © 1994-2002 Standard & Poor's, a division of The McGraw-Hill Companies. All Rights Reserved. Privacy Policy [rA Division of the ] file://C:~Documents%20and%20S ettings\finawalp~Local%20Settings\Temporary%20Internct%20Files\OL'" 01/15/2003