LTC 198-2019 G.O. Bond Credit Ratings 4.5.19MIAMI BEACH
OFFICE OF THE CITY MANAGER 198-2019
NO. LTC # LETTER TO COMMISSION
TO: Mayor Dan Gelber and Members o the City immission
FROM: Jimmy L. Morales, City Manager`m -
DATE: April 5, 2019 1
SUBJECT: G.O. Bond Credit Ratings
The purpose of this LTC is to advise you of the credit ratings assigned by Standard & Poors (S&P)
and Moody's to the City's 2019 general obligation bonds and outstanding prior G.O. bonds. I would
like to underscore that both S&P and Moody's have recently incorporated risks from climate change
and severe weather events into their credit rating analysis.
I am pleased that we have been able to maintain our strong credit ratings through our proactive efforts
to reduce risk by investing in our aging infrastructure and adapting to climate change by using the
best available science and knowledge. We must continue to act along these lines as climate
resilience will continue to be a consideration for future ratings. It is essential that we protect our tax
base and our financial standing by continuing to adapt and remain committed to our resilience
policies, programs, and operations. Both credit rating reports are attached for your review and
highlights are provided below.
Standard and Poors
S&P Global Ratings has assigned its "AA+" long-term rating to the City's 2019 general obligation
bonds and affirmed its "AA+" long-term rating on the City's G.O. bonds outstanding.
The "AA+" rating reflects the following:
Very strong economy
Very strong management
Strong budgetary performance
Very strong budgetary flexibility
Very strong liquidity
Please note that in the attached report, S&P mentions that "in our view, the city maintains among the
most robust plans attempting to address [climate change] risks that we've reviewed for U.S. local
governments." The report goes on to state that "while the City's efforts in this area are substantial, the
economic risks to the city from climate change have the potential to be significant...however, we
acknowledge the city's substantial actions to address these risks and will continue to monitor and
report changes to credit quality as our opinion and understanding of climate-related and 'tail' risks
such as major storms evolves."
The stable outlook reflects S&P's view of Miami Beach's very strong economy, along with its very
strong flexibility and liquidity positions. The City's financial position is further supported by its
proactive financial management practices and policies. S&P's rating could be raised if the City's debt
and liability position moderates and if the City continues to build and maintain its reserve position
given its exposure to climate-related events. S&P could lower the rating if the City experiences
budgetary pressure leading to weakened reserve and liquidity positions or if exogenous risks
materialize, leading to a significantly weakened economy and financial position.
Letter to Commission
G.O. Bond Credit Ratings
April 5, 2019
Page 2 of 3
Moody's
Moody's has assigned its "Aa2" long-term rating to the City's 2019 general obligation bonds and
affirmed its "Aa2 long-term rating on the City's G.O. bonds outstanding.
The "Aa2" rating reflects the following:
Large and growing tax base
Very strong cash position
Strong tourism reliant economy
Conservative budgeting
High institutional framework score
Please note that in the attached report, Moody's mentions that "management has invested
substantially in raising sidewalks and streets and stormwater and water and sewer
infrastructure...Management includes sea level rise assumptions in all capital planning and will
continue to invest in climate change mitigation."
The stable outlook reflects Moody's view of the City's ongoing tax base growth which is expected to
continue and which will yield a stable financial position in the near term. Additionally, Moody's is of
the opinion that management continues to manage the above average debt and pension burden and
exposure to sea level rise. Moody's rating could be raised if there is a significant improvement in
reserves and reduced debt and pension burdens. Moody's could lower the rating if there are declines
in cash and fund balances and increases in debt and pension burden.
Ratings Summary
Bonds Prior Rating New Rating
New G.O. Bonds S&P: N/A Moody's: N/A S&P: AA+ Moody's: Aa2
Existing G.O. Bonds S&P: AA+Moody's: Aa2 S&P: AA+ Moody's: Aa2
On the next page you will find a bond rating scale with descriptions. If you have any questions or
need additional information, please contact John Woodruff, Chief Financial Officer.
Attachments
S&P Ratings Report
Moody's Ratings Report
JLM/
Letter to Commission
G.O. Bond Credit Ratings
April 5, 2019
Page 3 of 3
Bond Rating Scale
S&P Moody's Rating Description
AAA Aaa Prime
AA+ Aal
AA Aa2 High grade
AA- Aa3
A+ Al Investment-grade
A A2 Upper medium grade
A- A3
BBB+ Baal
BBB Baa2 Lower medium grade
BBB- Baa3
BB+ Bal
Non-investment
BB Ba2
grade speculative
BB- Ba3
B+ B1
B B2 Highly speculative
B- B3
CCC+ Caal Substantial risks
Non investment grade
Extremely
AKA high-yield bonds
CCC Caa2 AKA junk bonds
speculative
CCC- Caa3 Default imminent
CCCa with little prospect
C for recovery
C
D In default
S&P Global
Ratings
RatingsDirect®
Summary:
Miami Beach; General Obligation
Primary Credit Analyst:
Randy T Layman,Centennial+ 1 (303)721 4109;randy.layman@spglobal.com
Secondary Contact:
Andy A Hobbs,Dallas+ 1 (972)367 3345;Andy.Hobbs@spglobal.com
Table Of Contents
Rationale
Outlook
Related Research
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 29,2019 1
Summary:
Miami Beach; General Obligation
Credit Profile
US$132.725 mil GO bnds ser 2019 dtd 05/07/2019 due 05/01/2049
Long Term Rating AA+/Stable New
US$23.3 mil rfdg bnds dtd 05/07/2019 due 05/01/2039
Long Term Rating AA+/Stable New
Miami Beach GO
Long Term Rating AA+/Stable Affirmed
Miami Beach GO
Unenhanced Rating AA+(SPUR)/Stable Affirmed
Many issues are enhanced by bond insurance.
Rationale
S&P Global Ratings assigned its'AA+'long-term rating to the City of Miami Beach's 2019 general obligation(GO)
bonds.At the same time, S&P Global Ratings affirmed its'AA+'long-term rating on the city's GO bonds outstanding.
The outlook is stable.
The city's GO bonds are secured by its full faith and credit,including its ability to levy ad valorem property taxes
without limitations as to rate or amount.
The new money portion of the 2019 GO bonds was issued pursuant to a 2018 referenda authorizing the issuance of
439 million in GO bonds.The 2019 bonds,with a preliminary par amount of$132.7 million and proceeds of$153.0
million,represent the first tranche under this authorization.With the proceeds the city plans to finance approximately
87.7 million in parks,recreational,and cultural facility capital projects,$36.9 million for public safety capital projects,
and$28.4 million for neighborhood and infrastructure projects.The refunding portion of the bonds will refinance the
city's 2003 GO bonds for debt service savings.
In our view,the city's position as an internationally renowned destination supports its robust economy and real estate
market,which has exhibited a high degree of historical growth and resilience despite being centered on what is
traditionally a relatively volatile industry.Continued interest in the city supports this position.The city's property
wealth and high incomes translate into a strong tax base that has supported a healthy reserve and liquidity position.
The city does face challenges from ongoing capital needs,including capital planning to address climate-related risks,
contributing to its large debt and liability position.However,in our opinion,the city's economic strength,financial
flexibility,and proactive management team serve to mitigate these challenges.
The'AA+'long-term rating reflects our view of the city's:
Very strong economy,with access to a broad and diverse metropolitan statistical area;
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Summary:Miami Beach; General Obligation
Very strong management,with strong financial policies and practices under our financial management assessment
methodology;
Strong budgetary performance,with operating surpluses in the general fund and at the total governmental fund level
in fiscal 2018;
Very strong budgetary flexibility,with an available fund balance in fiscal 2018 of 21%of operating expenditures,and
the flexibility to raise additional revenue despite statewide tax caps;
Very strong liquidity,with total government available cash at 141.3%of total governmental fund expenditures and
14x governmental debt service,and access to external liquidity we consider exceptional;
Very weak debt and contingent liability position,with debt service carrying charges at 10.1%of expenditures and
net direct debt that is 139.7%of total governmental fund revenue,and a large pension and other postemployment
benefit(OPEB)obligation and the lack of a plan to sufficiently address the obligation,but low overall net debt at less
than 3.0%of market value;and
Strong institutional framework score.
Very strong economy
We consider Miami Beach's economy very strong.The city,with an estimated population of 93,323,is located in
Miami-Dade County in the Miami-Fort Lauderdale-West Palm Beach metropolitan statistical area,which we consider
broad and diverse.The city has a projected per capita effective buying income of 157%of the national level and per
capita market value of$550,321. Overall,the city's market value grew by 1.9%to$51.4 billion in 2018.The county
unemployment rate was 3.9%.
Miami Beach,located along the Atlantic Ocean on a barrier island immediately to the east of the City of Miami,is a
globally recognized tourism and cultural destination and is home to some of the nation's most expensive real estate.
While the city's permanent population is slightly over 90,000,the city estimates it attracts over 10 million visitors
annually.The city's economy is centered on the hospitality and tourism industries,which provide significant revenue
for the city through its resort tax.The hotel industry continues to record gains in key metrics such as revenue per
available room(11.8%in 2018)and annual occupancy levels around 80%,near historic highs.A significant portion of
the city's visitors originate in the greater Miami area,providing some measure of stability to the variability of
destination travelers.While the city's economy depends heavily on the tourism industry,it has experienced recent
growth in professional service sectors,attracting employment in several tech firms and finance and insurance.
For a city of its size,Miami Beach annually hosts a large number of major conferences prestigious events. Its relative
attractiveness in this space is strengthened by the recently complete renovation of its convention center and ongoing
plans to expand the convention center hotel.
Property values in the city declined 17.4%during the latest recession,a fraction of the state average,reflecting the
attractiveness of its real estate market.After a low of$24.1 billion in 2010,market values rose over 110%to$51.4
billion in 2018. Out-of-state and international investors partly support the real estate market. Building permit activity in
the city remains strong,with permit values in 2018 near the 10-year average of$627 million. Coming out of the latest
recession,the city experienced only a modest decline in overnight visitor numbers while maintaining an upward
trajectory.While the city's revenue would likely stall during another economic downturn,we would anticipate that the
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Summary:Miami Beach; General Obligation
effects would be relatively muted compared with those for other local economies centered on tourism given the city's
international renown.
Furthermore,development activity and commercial interest in the city remain strong despite headline risks from issues
such as climate change.The city has instituted a number of policy changes--including stricter land use codes for items
such as building ground and seawall elevation,government infrastructure projects,and long-term planning
priorities--in an attempt to mitigate the risks associated with climate change. Management reports that the
development community has embraced these changes,and this is reflected in continued real estate development
throughout the city. It is our understanding that the insurance premium increases to compensate for climate and
weather risks have started to take hold throughout the area and Florida in general.This may deter future development
and net migration,but,to date,these risks have not had a significant impact on activity in Miami Beach or the state as
a whole.We will continue to monitor headline risks,including climate-related risks,affecting the state and the local
economy.However,we anticipate that our view of the city's economy will remain very strong over at least the
medium term.
Very strong management
We view the city's management as very strong,with strong financial policies and practices under our financial
management assessment methodology,indicating our view that financial practices are strong,well embedded,and
likely sustainable.
The city maintains a robust budgetary process,with revenue determined using historical trend analysis and forecasting
techniques and expenditures based on contractual obligations and conformity with the city's capital plans.A formal
financial report detailing year-to-date information and year-end projections are provided to the city commission
quarterly.The city maintains a formalized general fund financial plan,which details assumptions and provides revenue
and expenditure forecasts over a five-year period under a variety of scenarios.The city annually adopts a detailed,
five-year capital improvement plan listing projects,funding sources,and departmental responsibility.The city
maintains a formalized investment and cash management policy,placing restrictions on items such as security types,
investment credit quality and maturity,the use of alternative investments,and reporting. Formalized investment
reports are provided at least quarterly.The city carries a reserve policy requiring it to maintain an emergency reserve
of at least 11%of the ensuing year's budget and a contingency reserve of at least 6%.The city's debt issuance policy
limits GO debt to 15%of assessed value,but does not include other significant limitations beyond state statutes.
Additionally,the city maintains a formalized reserve policy for its resort tax fund requiring the fund maintain reserves
equal to six months of resort tax revenue(recently increased from two months)for contingency purposes.The city is
working toward meeting this goal,with reserves equal to approximately three months as of fiscal year-end 2018.
To address immediate and long-term climate and weather-related risks,to which the city maintains significant
exposure given its location on a barrier island in the southeast of the state,the city has undertaken a substantial
strategic and capital initiative.The city has already implemented a number of policies and commenced infrastructure
projects directly related to climate adaption and mitigation--with an effort to reduce risk relating to sea level rise,
general flooding,storm surges,and the potential for an increased frequency of major storms--widely predicted to occur
as the ocean's average temperature warms.In our view,the city maintains among the most robust plans attempting to
address these risks that we've reviewed for U.S.local governments.The city's robust strategic planning began in 2005
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Summary:Miami Beach; General Obligation
and has evolved to include a focus on robust stormwater planning in 2012-2013 and broader resilience planning in
2015. Some significant actions the city has taken thus far to address these risks include:
Raising the elevation of roads in the city's lowest elevation areas,particularly in the western part of the city along
Biscayne Bay
Improving the pipe and pumping capacity of the city's stormwater system,partly financed with the city's 2017
stormwater bonds,including 27 pumps installed or retrofitted thus far(with plans to address 80)
Working with other regional governments and the state to surveil and enhance coastal dunes,beaches,and dune
vegetation,which provide natural defenses against storm surges and high-tide flooding
Changing land use codes to require new homes to be built several feet higher than Federal Emergency Management
Agency requirements,increase ground elevation requirements,and increase seawall elevation requirements,among
other changes
Selected by Rockefeller Foundation's 100 Resilient Cities initiative to stay on the forefront of new information and
policies designed to address climate risk
Incorporating a significant amount of resilience-related projects into its capital plan,including projects to be
financed with the city's GO bond authorization,enterprise bonds,and pay-as-you-go spending
While the city's efforts in this area are substantial,the economic risks to the city from climate change have the
potential to be significant,as highlighted by a number of peer-reviewed scientific analyses and independent
organizations. However,we acknowledge the city's substantial actions to address these risks and will continue to
monitor and report changes to credit quality as our opinion and understanding of climate-related and"tail"risks such
as major storms evolves.
Strong budgetary performance
Miami Beach's budgetary performance is strong,in our opinion.The city had operating surpluses of 4.9%of
expenditures in the general fund and of 5.9%across all governmental funds in fiscal 2018.
Our analysis of the city's operational performance is adjusted to include regularly occurring transfers(primarily
transfers into the general fund from the resort tax fund and transfers out for debt service and pay-as-you-go capital)
and to remove expenditures financed from one-time resources such as debt proceeds.The city has realized positive
results in its general fund in all but two years since fiscal 2010,reflecting the city's strong revenue base and
conservative budgeting practices. Fiscal 2018 resulted in an increase to fund balance of$17.3 million,relative to a
budgeted use of$6.5 million in reserves,and despite incurring expenditures related to Hurricane Irma(approximately
3.8 million accounted for in the general fund,most of which is anticipated to be reimbursed by FEMA).
The 2019 budget represents a 4.5%increase over the 2018 budget,primarily representing increases to personnel costs.
The budget includes the use of approximately$1.0 million in unrestricted fund balance,though first-quarter projections
from the city point to a general fund surplus of$1.6 million.We find the projection reasonable given the city's history
of outperforming budgets.We note that the city's utility funds remain healthy while we factor in recent debt issuances,
proceeds from which partly went to financing projects to mitigate climate-related risks. Operating challenges for the
general fund include keeping up with personnel cost pressures associated with the city's collective bargaining
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Summary:Miami Beach; General Obligation
agreements,with negotiations ongoing with four of the city's five bargaining units,and continuing to fund required
pension and OPEB contributions. However,with positive results anticipated for 2019 and the city's track record of
realizing balanced-to-surplus results,we anticipate that our view of the city's budgetary performance will remain
strong-to-adequate.
Very strong budgetary flexibility
Miami Beach's budgetary flexibility is very strong,in our view,with an available fund balance in fiscal 2018 of 21%of
operating expenditures, or$67.8 million. In addition,the city has the flexibility to raise additional revenue despite
statewide tax caps,which we view as a positive credit factor.
The city's general fund reserves include its unassigned balance and reserves committed for emergency purposes per its
formalized reserve policies.The city also maintains contingency reserves of$14.2 million in its resort tax fund,in
accordance with that fund's reserve policy.The city's operating tax rate of 5.88 mills is below the state maximum of 10
mills,and we believe that this provides substantial flexibility and revenue-raising capacity given that property is
assessed at market values in Florida.We view the revenue-raising capacity as having the potential to offset salary and
fixed cost increases.The city recently dedicated 0.0755 mills from its operating rate toward pay-as-you-go capital
projects.With the city's GO debt program,the city estimates it will raise the debt service rate by approximately 0.8 to
0.9 mills over the life of the program. Given positive results anticipated for fiscal 2019,we anticipate that the city's
budgetary flexibility will remain very strong.
Very strong liquidity
In our opinion,Miami Beach's liquidity is very strong,with total government available cash at 141.3%of total
governmental fund expenditures and 14x governmental debt service in 2018.
Based on the city's frequent access to the capital markets and history of debt issuances across a variety of security
pledges,we believe it has exceptional access to external liquidity. In our view,the city's operating investment portfolio
does not constitute an aggressive use of investments that could lead to significant variability in the city's liquidity
position.The majority of the city's operating investments are held in the state's short-term investment pool,followed
by U.S.agency and Treasury securities.The city maintains a line of credit(though no outstanding draws)and a loan
that contain events of default we deem permissive and acceleration as a remedy,though we do not view these
obligations as posing significant contingent liquidity risks to the city primarily given their small size relative to the city's
overall liquidity position.We anticipate that our view of the city's liquidity position will remain very strong.
Very weak debt and contingent liability profile
In our view,Miami Beach's debt and contingent liability profile is very weak.Total governmental fund debt service is
10.1%of total governmental fund expenditures,and net direct debt is 139.7%of total governmental fund revenue.
Overall net debt is low at 2.7%of market value,which is,in our view,a positive credit factor.
Following the 2019 GO issuance,the city will have approximately$286 million in remaining GO debt authorization.
The city plans to issue the second tranche,equal to$100 million,in 2022.The city has plans to issue approximately
50 million in water/sewer-backed debt in 2021 and$100 million in stormwater-backed debt in 2022 per its 2017
financial feasibility studies,though no legal authorization is yet in place for these amounts.
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Summary:Miami Beach; General Obligation
In our opinion,a credit weakness is Miami Beach's large pension and OPEB obligation. Miami Beach's pension and
actual OPEB contributions totaled 17.3%of total governmental fund expenditures in 2018,with 14.6%representing
required contributions to pension obligations and 2.7%representing OPEB payments.The city made its full annual
required pension contribution.The funded ratio of the largest pension plan is 74.4%.
The city maintains two single-employer defined benefit plans:the Miami Beach Employees'Retirement Plan(MBERP)
and the Retirement System for Firefighters and Police Officers Plan(MBF&P).Although the funded status of the plans
has improved in recent years,we view the carrying charges as outsized relative to the budget and similarly rated
credits,and we view a number of assumptions associated with the plans as aggressive. In particular,we view the plans'
discount rates as comparatively high at 7.85%and 7.65%,though they have come down from around 8%.Poor
performance relative to the discount rate has the potential to lead to a lower funded status and higher annual
contributions.Additionally,the MBF&P maintains level percent contributions with a 30-year amortization schedule,
which we understand pushes contributions into future years.MBF&P maintains an unfunded liability of$301 million
and a funded ratio of 74.4%based on the latest measurement date.The MBERP maintains an unfunded liability of
217 million and a funded ratio of 73.9%.
The city's OPEB plan provides a monthly premium subsidy for eligible retirees and allows retirees to participate in the
city's group health care plan.We understand the city has made modest progress toward funding a trust for the plan,
which is 18.7%funded,but the plan remains substantially funded on a pay-as-you-go basis,exposing the city to
ongoing health care cost pressures.Although the presence of the trust is positive relative to the majority of the peers
we rate,we believe the unfunded liability with the plan remains substantial at$149.7 million.
Strong institutional framework
The institutional framework score for Florida municipalities with revenue or expenditures greater than$250,000 is
strong.
Outlook
The stable outlook reflects our view of Miami Beach's very strong economy,along with its very strong flexibility and
liquidity positions.The city's financial position is further supported by its proactive financial management practices
and policies.Thus,we do not anticipate changing the rating over the two-year outlook horizon.
Upside scenario
All else equal,we could raise the rating if the city's debt and liability position moderates,and if the city continues to
build and maintain its reserve position given its exposure to climate-related events.
Downside scenario
All else equal,we could lower the rating if the city experiences budgetary pressure leading to weakened reserve and
liquidity positions or if exogenous risks materialize,leading to a significantly weakened economy and financial
position.
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Summary:Miami Beach; General Obligation
Related Research
Alternative Financing: Disclosure Is Critical To Credit Analysis In Public Finance, Feb. 18, 2014
S&P Public Finance Local GO Criteria: How We Adjust Data For Analytic Consistency,Sept. 12, 2013
Incorporating GASB 67 And 68: Evaluating Pension/OPEB Obligations Under Standard&Poor's U.S. Local
Government GO Criteria,Sept. 2, 2015
2018 Update Of Institutional Framework For U.S. Local Governments
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.
Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is
available to subscribers of RatingsDirect at www.capitaliq.com.All ratings affected by this rating action can be found
on S&P Global Ratings'public website at www.standardandpoors.com.Use the Ratings search box located in the left
column.
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U.S.PUBLIC FINANCE
MOODY S
INVESTORS SERVICE
CREDIT OPINION Miami Beach (City of) FL
4 April 2019
Update to credit analysis
d Rate this Research
Summary
Miami Beach,FL(Aa2 stable)will continue to benefit from tourism and development in its
large and growing tax base with above average wealth levels. However,the city,located on a
barrier island across Biscayne Bay from Miami, FL, (Aa2 stable) is very susceptible to sea levelContacts
rise and flooding.The city will continue to benefit from a strong financial position althoughValentinaGomez1.212.553.4861 this is partially offset by the city's high fixed cost burden.AVP-Analyst
valentina.gomez@moodys.com On March 29,we assigned a Aa2 and stable outlook to the city's 2019 General Obligation
Tiphany Lee-Allen 1.212.553.4772 bonds.
AVP-Analyst
tiphany.lee-allen@moodys.com
Exhibit 1
CLIENT SERVICES Tax base growth remains strong
Americas 1-212-553-1653 60,000
Asia Pacific 852-3551-3077
Japan 81-3-5408-4100 50,000
EMEA 44-20-7772-5454
40,000
30,000
m
a
U
20,000
10,000
0
2013 2014 2015 2016 2017
Source:Audited FinancialStatements
Credit strengths
Large and growing tax base
Very strong cash position
MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE
Credit challenges
City is a barrier island susceptible to rising sea levels
Above average fixed cost burden
Rating outlook
The stable outlook reflects the city's ongoing tax base growth which we expect to continue and which will yield a stable financial
position in the near term.Additionally,management continues to manage the above average debt and pension burden and exposure to
sea level rise.
Factors that could lead to an upgrade
Reduced debt and pension burdens
Significant improvement in reserves
Factors that could lead to a downgrade
Declines in cash and fund balances
Increases in debt and pension burden
Key indicators
Exhibit 2
Miami Beads(City of)FL 2013 2014 2015 2016 2017
Economy/Tax Base
Total Full Value($000) 29,333,335 $31,944,197 $36,866,082 $44,648,127 $50,376,994
Fbpulation 89,412 90,669 91,564 91,784 92,187
Full Value Far Capita 328,069 $352,317 $402,626 $486,448 $546,465
Median Family Income(%of USMedian) 82.4%83.3%88.6% 91.3%92.7%
Rnances
Operating Favenue($000) 326,616 $339,974 $377,116 $403,716 $433,765
Fund Balance($000) 70,270 $70,377 $74,930 $93,119 $78,891
Cash Balance($000) 156,497 $150,727 $185,010 $225,393 $240,864
Fund Balance as a%of Favenues 21.5%20.7% 19.9% 23.1% 18.2%
Cash Balanceas a%of Favenues 47.9%44.3%49.1%55.8%555%
Debt/Ranson
Net Direct Debt($000) 197,066 $182,530 $164,283 $607,384 $590,214
3-Year Averageof Moody'sANFL($000) 1,270,339 $1,322,307 $1,313,505 $1,292,835 $1,433,425
Net Direct Debt/Full Value(%) 0.7% 0.6% 0.4% 1.4% 1.2%
Net Direct Debt/Operating Favenues(x) 0.6x 0.5x 0.4x 1.5x 1.4x
Moody's-adjusted Net Fannon Liability(3-yr average)to Full Value(%)4.3% 4.1% 3.6%2.9/° 2.8%
Moody's-adjusted Net Fannon Uability(3-yr average)to Favenues(x) 3.9x 3.9x 3.5x 3.2x 3.3x
Source:AuditedFinancial Statements,Moody's InvestorsService
Profile
Miami Beach, FL is located on barrier islands across the Biscayne Bay from the City of Miami, FL.The 2018 estimated population is
93,323.
This publication does not announce acredit rating action.For any credit ratings referenced in this publication,please see the ratings tab on the issuer/entity page on
www.moodys.com for the most updated credit rating action information and rating history.
2 4 April 2019 Miami Beach(City of)FL:Update to credit analysis
MOODY'S INVESTORS SERVICE U.S.PUBLIC FINANCE
Detailed credit considerations
Economy and tax base:Strong,tourism reliant economy with significant exposure to sea level rise
The city of Miami Beach is located on a barrier island across the bay from Miami and is a tourism and retail hub in south Florida(Aaa
stable). Full value of$51.4 billion greatly exceeds the median of$2.9 billion for similarly-rated issuers.Assessed value increased 78%
in 2018 to$37.4 billion and values have increased an average of 10.1%each of the last five years. Full value per capita is a very strong
557,103,reflecting the large commercial and hotel presence as well as the significant amount of very high-end real estate. However,
median family income is below the median of similarly-rated issuers at 92.7%of the US median,reflecting the significant retiree
population.
The city is heavily reliant on tourism and is the most popular destination in the county.The city reports more than 23,000 hotel rooms
with revenue per available room up 11.8%in fiscal 2018,the average daily rate up 9.0%,and occupancy up 2.6%.The convention
center renovation was substantially completed in September 2018 which should spur more tourism and convention visitors in 2019
and beyond.Additionally, in November 2018 voters approved the construction of a hotel connected to the convention center.The city
will lease land to the hotel operator and will not contribute financially to construction. Management believes that having a hotel at the
convention center will make the convention center more competitive compared to peers.
The city's location on a barrier island makes it particularly susceptible to flood and storm surge risk. Management has invested
substantially in raising sidewalks and streets and stormwater and water and sewer infrastructure.City management participates in the
100 Resilient Cities network and is a Steering Committee member of the South Florida Climate Compact.According to management
the city's infrastructure performed well during and after Hurricane Irma. Management includes sea level rise assumptions in alt capital
planning and will continue to invest in climate change mitigation.
Financial operations and reserves:Conservative budgeting drives recent surpluses and strong liquidity
Management is conservative and has run operating surpluses in each of the last five years,largely due to its strong economy and
assessed value appreciation. In fiscal 2017,available operating fund balance was$78.9 million or 18.2%of operating revenues,below
the median for similarly-rated issuers. Recent surplus have been driven by strong revenue growth and cost containment. Unaudited
2018 results include a $11 million surplus in the General fund and a$5.5 million surplus in the Resort Tax fund.
The 2019 budget included a$1.7 million General fund appropriation including$1.1 million for one-time expenditures.Through the first
quarter of fiscal 2019,management projects a $1.6 million surplus.
LIQUIDITY
The city ended fiscal 2017 with $240.9 million in cash or a very strong 55.5%of operating revenue,well above the median of 36.7%for
similarly-rated issuers.
Debt and pensions:Above average fixed cost burden
The city's debt burden is expected to remain somewhat elevated given ongoing investment related to climate mitigation.The city's net
direct debt burden of 1.4%is above average compared to the median of 1.1%for similarly-rated issuers.After this issuance,the city will
have$167.4 million in general obligation debt outstanding with another$286 million authorized by voters and expected to be issued in
three tranches(2022,2025,and 2028).The remaining general government debt includes$184.6 million in resort tax supported debt
and $308.9 million in tax increment supported debt.The city had $25 and $66.3 million in cash in the resort tax and tax increment
funds, respectively.
DEBT STRUCTURE
The city's debt is all fixed rate.
DEBT-RELATED DERIVATIVES
The city does not have any exposure to derivatives.
PENSIONS AND OPEB
The city maintains two single-employer,defined benefit pension plans:Miami Beach Employees Retirement Plan (MBERP)and
Retirement System for Firefighters and Police Officers(MBF&P). In fiscal 2017,the three-year(2015-2017)average annual net
pension liability was$1.4 billion or an above average 2.9 times full value. Moody's uses the adjusted net pension liability to improve
3 4 April 2019 Miami Beach(City of)FL:Update to credit analysis
MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE
comparability of reported pension liabilities.The adjustments are not intended to replace the city's reported liability information, but
to improve comparability with other rated entities.We determined the city's share of liability for the state-run plans in proportion to its
contributions to the plans.
The city maintains an OPEB trust which had a balance of$34.4 million at the end of fiscal 2018,compared to the city's unfunded
OPEB liability of$149.7 million.Total fixed costs(debt service,pension and OPEB) in fiscal 2017 totaled an above average 28.4%of
operating revenues.
Management and governance:Management maintains strong policies
Management is relatively conservative as evidenced by recent surpluses. Management also maintains many financial policies including
an emergency reserve of 11%fund balance in the General fund plus an additional 6%for contingencies. Management also recently
increased the fund balance policy for the resort tax fund from three months to six months of reserves.
Florida cities have an Institutional Framework score of Aa,which is high compared to the nation.Institutional Framework scores
measure a sector's legal ability to increase revenues and decrease expenditures.The sector's major revenue source,property taxes,
are subject to a cap of 10 mills,which cannot be overriden. However,most cities are well below the cap which allows for significant
revenue-raising ability.Unpredictable revenue fluctuations tend to be moderate,or between 5-10%annually.
4 4 April 2019 Miami Beach(City of)FL:Update to credit analysis
MOODY'S INVESTORS SERVICE U.S.PUBLIC FINANCE
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6 4 April 2019 Miami Beach(City of)FL:Update to credit analysis