Fitch Affirms Miami Parking System, FL's Revenue Rfdg Bonds at 'A'; Outlook Stable

Fitch Ratings affirms the City of Miami, FL Department of Off-Street Parking's (DOSP) approximately $70.7 million of outstanding series 1998 and 2009AB parking system revenue bonds at 'A'. The Rating Outlook is Stable.

Key Rating Drivers

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 3.9% in fiscal year (FY) 2012 (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 debt service coverage levels at or above 2.0 times(x) 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-cash flow available for debt service (CFADS) is comparable to the DOSP's peers at 5.02x. Ample liquidity of 253 days cash on hand (DCOH) provides cushion against short-term declines and expected life cycle costs associated with older parking garages.

Rating Sensitives

• Future rating action could result from further deterioration in the economic conditions of the City of Miami or additional DOSP leverage to aid the city;
• Significant declines in revenue per space could pressure the ability to pass through rate increases.

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 3.9% in FY 2012 to approximately $26.5 million. A breakdown shows that much of the increase came from on-street parking operations which grew by 5.2%. The growth in revenues can be attributed to the expansion of metered area in the central business district and increasing registrants to the Pay-By-Phone program.

The DOSP continues to manage operating expense growth as seen by a 1.3% increase in FY 2012. Expenses had previously declined in the 2 prior years and remain 8.3% under their peak in FY 2009. Management's investment in PADs and automated collections in owned parking garages has led to increased operating efficiency by cutting costs related to salaries, wages and fringe benefits and security. The number of employees in FY 2012 was 162, down from a peak of 230 in FY 2008.

The debt service coverage ratio increased for FY 2012 to 2.57x from 2.39x in FY 2011. Fitch expects future debt service coverage 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.

Revenue per space declined in FY 2012 to $1,098 from $1,200 in FY 2011. This drop was driven by a 23.6% reduction in parking lot revenue per space. The DOSP gained 2,064 parking lot spaces in FY 2012, many of which are located near Marlins Ballpark and thus experience a seasonal nature of activity that has resulted in a drop of revenue per space that is not projected to continue.

The DOSP owns/manages a total of 36,000 parking spaces, split between 11,300 on-street parking spaces, 86 surface lots and 14 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.