City of Miami seeks to get back on solid fiscal ground to secure future bonds
By Paola Iuspa
The City of Miami is positioning itself to re-enter the market as a financial adviser labels it fiscally sound and prepares a list of underwriting firms that could be used to secure bonds.
General obligation bonds, which are backed by property taxes, have not been issued in the past six years because the city's poor financial performance history would have made interest rates too high. This depleted money available for capital improvement projects and maintenance for existing structures, said Robert Nachlinger, assistant city manager who oversees the city's finance department.
But city officials think things have changed.
"The City of Miami is again on sound financial ground as a result of your care, focus and some difficult but very appropriate actions," Adolfo Henriques told city officials during last week's commission meeting.
"I want to commend you for these efforts," said Mr. Henriques, chairman and CEO of Union Planters Bank of Florida and head of a selection committee.
When the city is ready to issue bonds, it will probably bid among J.P. Morgan, UBS Paine Weber, Morgan Stanley/Dean Witter, Lehman Bros., Salomon Smith Barney and Jackson Securities. Those firms were recommended by the committee and approved by the commission and the city should go with whichever offers the best deal, Mr. Henriques said.
Merrett Stierheim, former Miami-Dade County manager and part of the five-member committee, said members reviewed 17 proposals from various firms and scored them according to pre-established criteria.
Although Moody's Investors Service recently upgraded the city's bond rating to investment grade, reducing the interest rate the city would have to pay, it still needs to rid itself of a state oversight board.
Miami was declared in 1996 to be in a financial emergency after it was discovered that the city had a $68 million deficit. The governor then created the oversight board, which still supervises the city's finances.
Mr. Nachlinger said it is possible the governor would remove the emergency status and oversight board early next year, allowing the city to get lower interest rates, after receiving Miami's annual audit. The report should show the city has been operating in the black for the past five years, he said.
"Their financial condition has significantly improved," said Mr. Stierheim, whose services were loaned to the city to offer advice for three months in 1996 to reorganize Miami's administration. "I gave them a recovery plan to follow back then. They came a long way. They worked really hard. Now they have a substantial reserve built up."
Today the city has about $65 million in reserves, with another $11.5 million invested in initiatives poised at helping the city generate revenue, city commissioners said. Some of those strategies include investing $6 million in making Brickell Avenue, downtown and the Design District more appealing to business owners. Another $1 million went to hire engineers to look at the city's internal workings. Also, $2 million was allocated to hire consultants to fast-track development on Watson Island, Bicentennial Park, Marine Stadium in Virginia Key and Dinner Key.
This investment plan, approved by commissioners in November, was headed by Ray Goode, vice president of public affairs with Ryder Logistics & Transportation Solutions Worldwide.
Because the city's tax base is about $16 billion, the city could issue up to $1.6 billion in bonds, Mr. Nachlinger said. The city now has more than $100 million in issued bonds.
In May, Miami Mayor Joe Carollo proposed issuing $320 million in bonds to help build a $500 million baseball stadium for the Florida Marlins in downtown Miami. Of that money, as much as $150 million would go toward the stadium while the rest would be used to improve roads, bridges and drainage systems and build parks.
Mr. Henriques said a challenge the city may have to weather before it issues bonds is securing a 20% parking surcharge Miami started collecting in 1999 to help balance the budget. Much of the city's revenue surplus was collected from that fee. But it was declared unconstitutional two months ago by an appellate court. Officials appealed to the Florida Supreme Court and await a ruling. City officials said they are also hoping to remedy the situation by having the legislature rewrite the law.
Mr. Nachlinger said the parking surcharge is not related to issuing bonds because the city would not be producing bonds backed by revenues from the tax. He said the only thing that could shake Miami's economy is a downturn in tourism, one of its largest sources of revenues.