Fitch Ratings has affirmed the City of Miami, FL Department of Off-Street Parking's (DOSP) approximately $68.7 million of outstanding series 1998A and 2009 A & B parking system revenue bonds at 'A'. The Rating Outlook is Stable.
KEY RATING DRIVERS
The affirmation reflects the DOSP's continued revenue growth and rate-making flexibility that has allowed the authority to have generated debt service coverage ratios (DSCR) at or above 2.0x historically. The DOSP's relatively limited service areas and its current leverage of 4.3x net debt to cash flow available for debt service (CFADS) constrain the rating.
Healthy Revenue Profile: The DOSP holds a monopolistic position over essential on-street parking spaces in the Miami central business district, which account for about 50% of operating revenues. The department's operation of parking garages, surface lots, and on-street parking spaces provides revenue diversity and minimizes reliance on any single system component. Revenues increased by 3.7% in fiscal year (FY) 2014 (ending Sept. 30).
Rate-Making Flexibility: The DOSP's authority to increase rates at an average annual rate of 3% per year without city council approval has helped the department maintain a solid operating profile and generate DSCRs at or above 2.0x historically.
Fixed Rate Debt Structure: The DOSP's debt profile consists of all fixed-rate debt and level annual debt service.
Moderate Leverage and Liquidity: Net debt-to-CFADS is comparable to the DOSP's peers at 4.3x. Ample liquidity of 245 days cash on hand (DCOH) provides cushion against short-term declines and expected life cycle costs associated with older parking garages.
Peers: The DOSP's peers include the City of Los Angeles Parking System ('A'/Outlook Stable by Fitch), Philadelphia Parking ('A-'/Outlook Stable) and Baltimore Washington Airport ('A-'/Outlook Stable). The City of Los Angeles Parking System shares a monopolistic nature of critical parking facilities with little competition in its service area. The Philadelphia Parking system and Baltimore Washington Airport's limited exposure to airport operations constrain their ratings lower.
RATING SENSITIVITIES
Negative:
--Deterioration in the economic conditions of the City of Miami leading to lower parking revenues and declining debt service coverage ratios (DSCRs) would pressure the rating;
--Additional leverage for the DOSP for capital needs or to aid the city that causes a material change in leverage metrics or debt service coverage ratios could lead to a decline in credit quality;
--Significant declines in revenue per space could pressure the ability to pass through rate increases and weaken credit quality.
Positive:
--Positive rating actions are considered unlikely in the near term
SECURITY
The bonds are special and limited obligations secured by a pledge of net revenues of the city's parking system and the money and investments and interest thereon of funds and accounts established under the bond ordinance.
CREDIT UPDATE
Parking revenues increased by 3.7% in FY 2014 to approximately $28.7 million from $27.8 million in 2013. A breakdown shows that much of the increase came from management fees, which grew by 7.3%. Growth in registrants to the Pay-By-Phone program continued in FY 2014, increasing by about 85,000 to approximately 275,000.
Operating expenses grew 4.2% in FY 2014 due primarily to increased maintenance costs, renegotiations with several significant revenue generating locations, as well as more staff needed to manage the growing parking system.
The DSCR increased for FY 2014 to 2.72x from 2.57x in FY 2013. Fitch expects future DSCR to be maintained at or around current levels, assuming that the DOSP implements future rate increases in accordance with the 2009 parking ordinance and continues to manage operating expenses.
In FY 2014 revenue per space increased to $1,308 from $1,154 in FY 2013. This growth was driven by a 20.2% increase in parking lots revenue per space.
The DOSP owns/manages nearly 36,000 parking spaces, split between 10,400 on-street parking spaces, 74 surface lots and 15 parking garages. DOSP revenues are derived primarily from the meters, lots, and garage operations. Although DOSP shares in parking enforcement responsibilities, revenues from parking enforcement go directly to the city and Miami-Dade County. The DOSP is an agency and instrumentality of the City of Miami, governed by a five-member board of directors appointed by the city commission.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012).
Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978750
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