OREANDA-NEWS. August 31, 2015. Fitch Ratings has affirmed the 'BBB' rating on approximately \\$31.6 million of Miami-Dade County's (the county) Rickenbacker Causeway (the causeway) revenue bonds series 2014. The Rating Outlook is Stable.

The rating reflects the narrow franchise strength of the asset, which depends on leisure traffic for an extremely high portion of its revenue. This risk is partially offset by a long operating history, solid projected coverage, and a flat debt service profile. Leverage on senior debt is manageable, but the ability for remaining cashflow after debt service to transfer out for both other county obligations and renewal and replacement (R&R) deposits, could limit the flexibility to allocate funds for capital expenditures in future years.

KEY RATING DRIVERS

Revenue Risk - Volume: Weaker
Historic Bridge Dependent on Leisure: The causeway has a long operating history, but depends on leisure traffic for 90% of revenue. The causeway, the only crossing to Virginia Key and Key Biscayne, serves a narrow catchment area and competes with other regional tourist destinations.

Revenue Risk - Price: Midrange
Moderate Pricing Flexibility: The county has shown willingness to raise rates on discretionary trips over the last 10 years, but the leisure orientation of the bridge could limit future pricing power. Tolls on leisure trips must be sized to cover the majority of costs as commuters pay only for annual plans, rather than for each crossing. Though annual commuter plan cost is low, political risk exists with raising rates on these plans should discretionary trips decline, given the lack of demonstrated history.

Infrastructure Development and Renewal: Midrange
Adequate Approach to Lifecycle Maintenance: Projections for capital maintenance are acceptable, and Fitch views positively the requirement for an engineer to recommend capital costs on a five-year forward basis given the age of the facility. The current engineers report has highlighted \\$5.8 million of R&R deposits needed through fiscal 2020. As Rickenbacker surplus cash can be used for other county purposes, capital reserve build-up could be limited and deferred maintenance could result.

Debt Structure: Stronger
Conservative Debt Structure: The revenue bonds are fixed rate and fully amortizing with a flat profile. Security provisions are standard for toll road assets while additional debt restrictions are stringent.

Metrics Reasonable for Revenue Risk: Moderate asset leverage and generally high coverage of senior debt service and R&R deposits are consistent for the rating category and leisure nature of the asset. Payment of subordinate debt service (legally county debt) and other obligations could constrain extraordinary maintenance funding and cash build-up.

Peers: The best Fitch-rated peer for the causeway is the Mid-Bay Bridge Authority (rated 'BBB+'/'BBB', Outlook Stable) near Fort Walton Beach, FL, with both facilities exhibiting a similar exposure to leisure traffic. The higher rating on Mid-Bay Bridge's senior lien is driven by the Florida Department of Transportation's obligation to cover extraordinary maintenance cost. Another relevant peer with similar leisure exposure is the Chesapeake Bay Bridge and Tunnel District (CBBT) (subordinate lien rated 'A-', Outlook Stable), although CBBT maintains extremely low leverage and higher levels of financial flexibility.

RATING SENSITIVITIES

Negative - Lower Coverage: Sustained coverage of senior debt service below 2x and/or of R&R deposits in the range of 1.3x driven by additional debt or underperformance could trigger negative rating action.

Negative - Transfers of Funds: The practice of transferring meaningful surplus cash for non-project county uses could also trigger negative action.

Positive - Positive rating action is unlikely given the narrow demand profile and discretionary dependence on toll revenue.

CREDIT UPDATE

The Rickenbacker Causeway is owned and operated as an enterprise fund of the county. The causeway crosses the Miami South and Deering Channels via State Road 913 and serves as the sole connection to the Virginia Key and the Village of Key Biscayne, islands off the mainland of downtown Miami. The causeway on its western end connects with I-95 near its southern terminus and U.S. Route 1.

The causeway opened in 1947 and, as of the late 1980s when the facility was expanded, operates as a six-lane facility with 2.4 miles of roadway and 1.2 miles of bridge structures with adjacent shoulders and bicycle and pedestrian lanes and pathways. The West Bridge is just over 0.1 miles in length and connects downtown Miami with the small Hobie Island. The Bear Cut is the easternmost bridge structure and, at 0.4 miles, connects the Virginia Key to the more southerly Key Biscayne.

Vehicles pay tolls only upon entering the islands traveling south and east. Roughly half of the causeway's vehicular traffic consists of discretionary and transient trips for leisure activities at the various parks and beaches located along the islands while the other half is primarily commuter based, serving the islands' over 4,000 jobs, 12,000 residents, and small student base.

The bonds were issued to reimburse the county for funds previously expended to replace the superstructure and repair and rehabilitate the substructure of the West Bridge and Bear Cut Bridges.

Through the first eight months of fiscal 2015, traffic is up 5.0% and revenues are 22.5% higher than the same period in fiscal 2014. The revenue growth is due not only to the increased traffic but also the new restriction on annual plan eligibility that was implemented with the toll system conversion. The change converted many annual plan customers to regular SunPass customers who now pay per trip charges.

The West Bridge and Bear Cut Bridge projects funded with the 2014 bond proceeds were completed along with the toll system upgrade which was finished in early fiscal 2015.

Fitch considered cash flows through 2027 in its base and rating cases. The county supplied a conservative sponsor model through the life of the bonds with no traffic growth and no price elasticity on toll increases. A toll increase of \\$0.50 is modeled for 2018 with an additional \\$0.25 every 5-7 years thereafter. Fitch's base case assumes flat traffic and the rating case projects a 5% traffic diversion in years of projected toll increases in light of the significant leisure component of the traffic base. In addition, Fitch's base and rating cases also assume the county is able to increase tolls in 2018 as projected, but by only \\$0.25, an adjustment which would be consistent with the causeway's toll rate increases since 2006. Long-term operating expenses were unchanged in the base case from the sponsor's projections, but the rating cases stressed expenses a further 50 basis points.

Average debt service coverage equals 3.0x in the base case and 2.5x in the rating case, which Fitch views as adequate for the rating of 'BBB.' Leverage remains elevated at around 5.0x in the base case until 2018 when the county implements its planned toll increase. Should the rating case traffic and expense assumptions be realized fruition in the next five years, Fitch would expect the county to implement a further toll increase or defer capital projects not part of the R&R fund to preserve financial flexibility.

SECURITY

The bonds are secured by revenues, primarily toll revenues, generated on the Rickenbacker Causeway after the payment of operating expenses.