OREANDA-NEWS. November 25, 2015. Fitch Ratings has assigned an 'A+' rating to the following Miami-Dade County, FL (the county) revenue bonds:

--\\$82,665,000 solid waste system revenue refunding bonds, series 2015.

The bonds are being issued to refund the outstanding series 1998, 2001 and 2005 solid waste revenue bonds for debt service savings. A negotiated sale is scheduled for Dec. 1.

In addition, Fitch affirms its 'A+' rating on the following outstanding bonds anticipated to be refunded:

--\\$93 million solid waste revenue bonds, series 1998, 2001 and 2005.

The Rating Outlook is revised to Stable from Negative.

SECURITY

Bonds are secured by net revenues of the county's solid waste system (the system). Debt service reserve funds are provided through cash and surety bonds.

KEY RATING DRIVERS

IMPROVED OPERATIONS: The revision of the Outlook to Stable reflects the system's sustainably improved financial position. Lower expenditures and increased processed waste levels led to improved fiscal 2014 debt service coverage (DSC) of a solid 2.31 times (x). Further improvements are projected for fiscal 2015 and liquidity remains strong.

FEES COLLECTED ON TAX BILL: Residential solid waste assessments collected from over 328,000 households are charged on the property tax bill, providing strong incentive for payment. Revenues from these tax bills represent approximately 55% of total fiscal 2014 revenues and provide revenue stability. The county board of commissioners retains ability to raise these fees.

FUTURE DEBT ANTICIPATED: The system's capital plan for the next five years anticipates additional borrowings for landfill closure and fleet replacements. The rapid amortization of current debt combined with pro forma annual debt service savings from the proposed refunding should limit the impact on financial operations.

ECONOMY EXPERIENCING GROWTH: The local economy continues to experience improvement. Unemployment rates have improved and new development combined with rising home values are leading to tax base increases. Reported tourism rates also depict growth the last two years.

WEAK LEGAL PROTECTIONS: The additional bonds test and rate covenant are both 1.20x and allow the use of a portion of the rate stabilization fund to be included in meeting these thresholds.

RATING SENSITIVITIES

ADEQUATE DEBT COVERAGE LEVELS: The current rating reflects sound debt service coverage and liquidity levels. A material and sustained decline in either of these measures would result in negative rating pressure.

CREDIT PROFILE

The fully integrated solid waste system operates as a self-supporting enterprise fund of Miami-Dade County. The system provides solid waste collection, recycling and disposal services. Collection service is provided to all single family and small multi-family residences. In addition, collections are provided to a small number of commercial and larger multi-family accounts in the unincorporated portions of the county and certain municipalities.

The county has entered into long-term interlocal agreements with 15 municipalities to provide solid waste disposal services. These contracts were recently renewed and last 10 to 20 years depending on the municipality. The county has also contracted with 12 municipalities to provide curbside recycling.

The system also includes the county-owned waste-to-energy Resources Recovery Facility (RRF), three landfills (one of which is for the disposal of ash byproducts), three transfer stations, 13 neighborhood trash and recycling centers, and contract disposal capacity with two alternative private providers at four facilities. The county provided waste collection to an average number of 328,549 residential units in fiscal 2015, up 1.3% from fiscal 2013.

FISCAL 2014 RESULTS BETTER THAN EXPECTED; STRONG DEBT COVERAGE
Fiscal 2014 results reflect an improvement in net operating revenues as tipping fees and collection revenues experienced growth from fiscal 2013. Offsetting the decline in electric revenues (down \\$17.4 million or 6.6% of total revenues) is the reduction in contractual payments to Covanta, the resource recovery plant operator. Fiscal 2014 total waste tonnage processed rose 4.3% over fiscal 2013 levels and resulting DSC from net revenues of \\$43.4 million equaled a sound 2.31x. This is an improvement from 1.64x coverage in fiscal 2013 when net revenues were \\$30.7 million.

In mid fiscal 2014, the county provided projections showing coverage dropping to close to 1.15x due to reduced energy revenues and increased disposal costs tied to greater levels of waste being processed. However, positive variances were seen in overall revenues and collection and energy related expenses leading to the stronger than budgeted DSC.

FISCAL 2015 PROJECTIONS SHOW HIGHER REVENUES
Tonnage levels for fiscal 2015 were budgeted conservatively and management raised the utility service fee by a half percent generating close to \\$1 million in new revenues. Tipping fees and surcharges rose via contract by 2.3% based on the increase in the Consumer Price Index (CPI). Actual total tonnage of 1,691,370 was up 2.5% compared to fiscal 2014. Projections show a 2.4% rise in total revenues as a result of these changes. Expenditures are projected to remain flat compared to fiscal 2014. Net revenues of \\$49.3 million plus interest result in estimated fiscal 2015 DSC of 2.65x.

STRONG LIQUIDITY LEVELS
Reserve levels remained strong as of Sept. 30, 2014, with unrestricted cash and investments of \\$183 million, equal to 84% of fiscal 2014 operating expenses. When combined with the rate stabilization fund (\\$20.7 million) and operating expense reserve (\\$38.4 million) total cash available for operations raises to \\$241.8 million, or a strong 404 days cash on hand.

Projected fiscal 2015 results show unrestricted cash and investments increasing to \\$188 million and when combined with projected operating reserves and the rate stabilization fund, liquidity increases to \\$248 million or a strong 414 days. The system has maintained its rate stabilization fund at \\$20.7 million for the last nine years.

BULK OF REVENUES DERIVED FROM TAX BILL
The majority (approximately 55% in fiscal 2014) of system revenues are derived from a household collection fee charged to the residential property tax bill. This stable revenue source strongly supports the 'A+' rating on the bonds.

The fee may be annually adjusted subject to approval by the county board of commissioners but such rate, currently \\$439 a year, has not changed since Oct. 1, 2006. Other revenues include tipping fees, which are subject to an annual CPI adjustment. These fees are derived from municipal interlocal agreements and private haulers and equate to approximately 25% of revenues. These agreements provide additional stability to revenues as such contracts mature between 2025 and 2035.

There is currently no local flow control ordinance in place for these municipalities, although newly incorporated municipalities are required to remain in the county's collection system. That said, the county board of commissioners could decide to enact such an ordinance if necessary.

Proceeds from waste to energy sales (5%), and a utility service fee charged to county water and sewer users (9%) make up the other major components of revenues. Future projected utility service fees are projected to rise as these revenues align with water and sewer revenues for which rate increases are proposed for the next few years.

WEAK LEGAL COVENANTS
No changes are being made to bond covenants as the refunding bonds will be issued under the original bond ordinance. The bond rate covenant and additional bonds test of 1.2x maximum annual debt service (MADS) permits net operating revenues to be adjusted by adding amounts on deposit in the rate stabilization fund in an amount not to exceed 20% of net operating revenues. Notably, the system's historical debt service coverage has been in excess of 2.0x in eight of the last eleven fiscal years with fiscal 2013 serving as the low point. Funds from the rate stabilization fund have not been used in the calculation of DSC since fiscal 2003. A reserve fund is required to be funded at the standard level for any new senior lien bonds, although surety bonds are permitted.

FUTURE DEBT EXPECTED TO SERVE EQUIPMENT AND CAPITAL NEEDS
The county capital improvement plan (CIP) includes the fiscal 2017 issuance of \\$24 million in senior lien bonds to support the closure of the Virginia Key landfill. Other borrowings through subordinate capital leases are anticipated to support fleet modernization and replacement. The anticipated cost is \\$140 million with annual borrowings spread out over five years. Each of the capital leases are expected to be amortized over 10 years. The period and level of replacement can be modified, according to management, based on changes in system operations and any unforeseen pressures.

The amortization of current debt is rapid at 78% in 10 years. This helps mitigate the risk of operational pressure from future additional debt service.

The county has other capital needs tied to landfill expansions, remediation and closures and these will be funded in part from county general obligation bonds and system cash. Other projects include general facility improvements and maintenance needs which are expected to be funded on a pay-go basis. Management projects cash levels will remain sound.

The county has estimated that existing landfill capacity is adequate through at least 2030. The county has contracted for additional landfill capacity if necessary totaling 1.75 million tons, with 1.25 million tons landfill capacity located outside the county. The RRF is reportedly in good condition and will continue to be used to meet the bulk of the county's disposal needs.

Management's five year financial forecast shows maintenance of DSC between 2.0x and 3.0x. New revenues tied to utility service fee increases, disposal fees, and a new energy sales contract with the City of Homestead beginning in fiscal 2020 (approximate \\$2.3 million in new revenues) help support this projection. Expenditures are conservatively projected to increase and include negotiated salary increases for fiscal 2017 and new debt service costs.

Fitch expects future annual waste generation to increase on a moderate basis as the economy continues to see growth. Sustained DSC in excess of 2.0x may be difficult to achieve given future capital needs and annual expenditure growth from operations. The maintenance of adequate tipping and household collection fees to meet these needs is expected by Fitch.

DIVERSE ECONOMY EXPERIENCING SIGNS OF TURNAROUND
The area economy is diverse with a large international component. The presence of healthcare, higher education, and professional and business services balance the tourism component of the county's economy for which it is so well known. Wealth levels for the county are below average and the county's unemployment rate of 6.3% for August remains above state and U.S. averages. The rate has improved from 7.3% for the prior year, although labor force declined by 0.6% and employment increased 0.4%.

Home prices continue to rebound strongly. According to Zillow.com, housing values have improved 9.9% year over year countywide through September. The county's tax base grew 9.4% for fiscal 2016 reflective of not only the increase in housing values but new development occurring within the county.