Miami-Dade moves to 'buy back' county hall
By Lou Ortiz
With a fund expected to total $49 million, Miami-Dade County is going ahead with plans to "buy back" County Hall, officials said.
The "buy-out of the lease occurs in 2015," said Frank Hinton, director of the Bond Administration Division in the County Finance Department. "The buy-back plan is being funded as provided in the lease. The repurchase is still a viable plan."
To profit by $3.2 million, the county in a complicated "lease/leaseback" transaction leased the Stephen P. Clark Government Center at 111 NW First Ave. — the nerve center of the county's operations — to a Dutch mega-bank in late 1998. The bank then leased it back to the county.
Netherlands-based Rabobank, which says is among the world's largest 30 financial institutions, put about $99 million into the deal.
Lease/leasebacks, or LILOs, were a popular way at the time for a government — transit systems in particular — to make money upfront from a firm that then benefited from the tax shelter, which the IRS years later did away with.
"County Hall was leased using a lease/leaseback structure which the IRS has since disallowed as an option under tax law," Mr. Hinton said. "As such, the county will not be able to utilize this structure in the future."
"Depending on IRS regulations," he said, "the county may consider other sale/lease structures if they prove to be advantageous to the county."
When Miami-Dade executed the transaction in 1998, the county put money aside in a guaranteed investment contract (GIC) through New York-based American Municipal Bond Assurance Corp., commonly known as Ambac Assurance Corp. The account was valued at $35.5 million in 2009 and growing annually at 6.04%.
But Ambac's credit ratings began to teeter and the company filed for Chapter 11 bankruptcy protection on Nov. 8, 2010. Before Ambac's bankruptcy, Rabobank asked the county to set aside $10 million in a third-party account as collateral.
Since then, "the county has placed $7.6 million of collateral in a trust to guarantee the set aside investment," Mr. Hinton said. "This has satisfied the technical default — the county is no longer in default — under the lease agreement."
Commissioners without discussion OK'd funding the collateral account in November 2009. And Robobank has not had to access the funds.
Ambac continued to operate under court supervision after the firm declared bankruptcy.
Meanwhile the $35.5 million fund, which is earning the same annual interest rate despite Ambac's financial problems, is expected to total the $49 million needed by the county to buy-back the 31-story, 1985-vintage building in 2015.
"The GIC [guaranteed investment contract] is still in effect," Mr. Hinton said. "Ambac is still guaranteeing the GIC to earn 6.04%. The market value of the GIC is $41.6 million and will equal $49 million… in 2015."
"The GIC will be used to pay the remaining lease value," Mr. Hinton said, "thereby terminating the remaining term of the lease."
In May, Ambac posted a first-quarter profit of $253.3 million, compared to a loss of $819.3 million in the same period in 2011, according to the firm's website. The US District Court for the Southern District of New York approved Ambac's reorganization plan in March this year.
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