Dec 6 - Fitch Ratings has affirmed its 'AA' rating on the following
outstanding Town of Miami Lakes, Florida's (the town) special obligation (GO)
--$7.33 million (Government Center Project) special obligation bonds (Federally
Taxable - Build America Bonds - Direct Subsidy), series 2010.
In addition, Fitch has affirmed the town's implied unlimited tax GO rating at
The Rating Outlook is Stable.
The town irrevocably pledges its electric utility tax (part of the public
service tax) for repayment of the bonds. The electric utility tax levied at 10%
of electricity purchases and included on each customer's electric bill. Bonds
are additionally secured by a cash funded debt service reserve fund.
KEY RATING DRIVERS
TAX REVENUE DERIVED FROM ESSENTIAL COMMODITY: Pledged tax revenues provide ample
coverage of maximum annual debt service (MADS). Legal provisions for the special
tax bonds are adequate.
STABLE FINANCIAL PROFILE: Management's conservative budgeting practices and
expense management has resulted in maintenance of adequate financial flexibility
despite substantial assessed value and revenue declines and significant fund
balance drawdowns for one-time capital.
FAVORABLE DEBT PROFILE: Debt levels are exceptionally low and capital needs are
manageable, offsetting the very slow amortization rate. Pension costs are very
low and the town does not offer retirement benefits.
ECONOMY SHOWS IMPROVEMENT: The town benefits from its location in the broad and
diverse Miami metropolitan area. The town's tax base is showing signs of
stabilization and is poised to benefit from ongoing development efforts which
should also help continue to reduce the still elevated tax payer concentration.
SOCIOECONOMIC INDICATORS MIXED: Area wealth levels are above-average but
unemployment rates remain high.
Miami Lakes, incorporated in 2000 with a population of 29,000, is located in
Miami Dade County (rated 'AA' with a Stable Outlook by Fitch), 16 miles from
PLEDGED REVENUES PROVIDE AMPLE COVERAGE OF MADS
The pledged revenues on the bonds are derived from a tax on the purchase of
electricity within the town. The tax is currently levied at the maximum rate
permitted by statute of 10% and is collected by the seller (Florida Power &
Light, IDR of 'A' Stable Outlook by Fitch) at the time of sale and remitted to
Coverage from fiscal 2012 pledged revenues on MADS (in 2019) of $928,499 was
2.7x based on revenues of $2.5 million. Coverage is even stronger at 3.4x when
the federal subsidy is included. Electric utility tax revenues improved 2.14%
last year from fiscal 2011 levels and have increased an average of 3.4% annually
over the last five fiscal years.
The 10% utility tax is levied on each customer's electric bill and therefore
total revenues are influenced not only by changes in economic activity but also
changes in the cost of generating and delivering the essential commodity.
The town has no current plans to levy the electric tax further and utilizes
residual tax revenues to fund town operations. Fiscal 2011 revenues of $2.45
million represented 17% of general fund revenue.
LEGAL PROVISIONS ARE ADEQUATE
The issuance of additional parity bonds requires historical pledged revenues to
provide 1.25x coverage of MADS on existing and proposed debt. The series 2010
bonds are Build America Bonds subject to a direct subsidy from the U.S.
Treasury. All principal and interest payment calculations referred to in the
bond resolution are net of the annual 35% interest rate subsidy expected from
the U.S. Treasury. This includes the ABT and sizing of the cash funded reserve
fund. Revenues are deposited monthly in the town held interest and principal
accounts equal to 1/6th and 1/12th of bond payments due, respectively.
FINANCES ARE SOUND
The town's financial position remains sound after a period of reduced revenues
due to a stressed economy and lower property values. In fiscal 2011, the general
fund balance decreased by $1.4 million primarily due to payment of a one-time
residence dividend ($600,000) from available funds from fiscal year 2010 along
with a transfer to capital for ongoing capital improvement needs. The town's
unrestricted general fund reserve position at fiscal end 2011 was $8.4 million
or a high 51% of spending.
The town provides few services to residents directly and negotiates contracts
with outside entities for the provision of most key services. Fire service is
provided by Miami-Dade County and residents are assessed a separate ad valorem
millage by the county for this purpose. Public safety, provided through a
contract with the county, is the largest town expense accounting for nearly half
of all general fund spending in fiscal 2011.
Revenues are diversified with property taxes accounting for 36% of the fiscal
2012 budget, followed by intergovernmental revenues (27%), utility taxes (17%),
and electricity franchise fees (11%). The town's ad valorem millage rate of 2.35
mills in fiscal 2012 and 2013 is low compared to other towns in the county and
well below the maximum state cap of 10 mills.
The fiscal 2012 budget included an appropriation of fund balance of $4 million
towards capital projects as well as a carryover of unused funds of $1.1 million
from fiscal 2011. Fitch does not generally view the use of reserves for one-time
capital purposes as a credit negative when overall financial flexibility remains
adequate. Projections for fiscal 2012 show an $845,000 operating surplus
according to management as a result of positive variances primarily on the
expenditure side. The town's general fund balance is projected to decline to
approximately $3.6 million, or a still solid 25% of the fiscal 2013 budget.
The fiscal 2013 budget does not include any material changes except for
additional contributions from revenues of $400,000 towards capital construction
improvements throughout the town. Fund balance is expected to remain unchanged
and well in compliance with the town's 15% policy.
MIXED SOCIOECONOMIC INDICATORS
Town wealth levels are high relative to the state and national averages.
Employment information for the town is not available but countywide unemployment
remains elevated at 8.9% in October compared to 10.7% a year prior.
The town's tax base of $3.37 billion has experienced material weakening in
recent years declining 33% between 2008 and 2012. Taxable value was up slightly
in 2012 and while Fitch views management's expectation for continued growth
somewhat cautiously, stabilization does appear likely. Successful new
development either near completed or underway would bolster tax base
The Graham Companies is a privately held corporation with substantial real
estate interests and a major presence in the town. The owner of a large portion
of property within the town's central business district, Graham and the Sengra
Development Corporation, together compose a sizeable 16% of the tax base. Top 10
taxpayer concentration, reported at an above-average 21% for fiscal 2013, has
declined from 24% in fiscal 2011 even with the decline in AV, further evidencing
the new development.
Longer-term economic prospects for the county are favorable and supported by an
excellent regional transportation network featuring interstate highway access
and domestic and international air service via several airports. The region also
benefits from year-round tourism, cultural, and recreation attractions, and a
sizable education and healthcare presence.
FAVORABLE DEBT PROFILE
Debt levels are low. The bonds represent the town's first and only direct public
debt issuance. The town also pays 2.9% of debt service towards Quality
Neighborhood Improvement bonds issued by the county for a total debt service
burden at a low 0.9% of spending. The town plans to use accumulated capital
project funds and some general fund reserves for pay-as-you go capital projects.
A potential $1.8 million borrowing may be sought for road improvements which is
well affordable and would not materially affect debt ratios.
The town participates in the state operated Florida Retirement System (FRS). The
annual pension contribution is approximately $200,000 per year (1.2% of
spending). The town has 34 full time employees but does not have any union
contracts. No retirement benefits are offered by the town, other than benefits
provided through the FRS.
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's Tax-Supported
Rating Criteria, this action was additionally informed by information from
Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index,
IHS Global Insight, Zillow.com, National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria