OREANDA-NEWS. Fitch Ratings has affirmed the City of Miami, FL Department of Off-Street Parking's (DOSP) approximately $66.6 million of outstanding series 2009 A & B parking system revenue bonds at 'A'. The Rating Outlook is Stable.

The rating affirmation reflects the DOSP's continued revenue growth, rate-making flexibility, and expense management, allowing the authority to generate debt service coverage ratios at or above 2.0x historically, consistent with the rating. The DOSP's relatively limited service areas and its current leverage of 4.2x net debt to cash flow available for debt service constrain the rating.

KEY RATING DRIVERS

Revenue Risk - Volume: The DOSP holds a monopolistic position over essential on-street parking spaces in the Miami central business district, which account for 53% 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. A rate increase contributed to a favorable estimated 10% increase in revenues in fiscal year 2015 (unaudited, year ending September 30).

Revenue Risk - Price: 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 2x historically. The DSOP makes substantial transfers to the city after payment of debt service.

Infrastructure Development & Renewal: The three year capital plan is largely dedicated to construction of three new parking garages, with funding provided by developer contributions and the sale of an existing asset.

Debt Structure: The DOSP's debt profile consists of all fixed-rate debt and level annual debt service, with 25% of debt maturing in ten years. Debt covenants are sound with an additional bonds test of 1.5x and a cash funded debt service reserve fund.

Moderate Leverage and Liquidity: Net debt-to-cash flow available for debt service (CFADS) is comparable to the DOSP's peers at 4.2x. Ample liquidity of 203 days cash on hand (DCOH) provides cushion against short-term declines and expected life cycle costs associated with older parking garages.

Peers: The DSOP's peers include Philadelphia Parking
('A-'/Stable Outlook), Baltimore Washington Airport
('A-'/Stable Outlook), and Pennsylvania Economic Development Authority (Harrisburg Parking; 'BBB-'/Stable Outlook). The Philadelphia Parking system and Baltimore Washington Airport are also viewed as peers even though their exposure is linked to airport operations; the narrower revenue stream constrains their ratings lower. The Harrisburg parking system is of modest size and has high leverage and a rising debt structure that necessitates rising rates.

RATING SENSITIVITIES

Negative:
--Deterioration in the economic conditions of the City of Miami or material additional reliance on the DOSP to aid the city could weaken credit quality.

--Expense growth absent adequate rate increases resulting in a meaningful decline in debt service coverage ratios.

--Significant declines in revenue per space could pressure the ability to pass through rate increases and weaken credit quality.

Positive:
--Fitch does believe the rating will be adjusted higher in the near to medium term.

SUMMARY OF CREDIT

Preliminary unaudited results for fiscal 2015 show a continuation of the system's long standing historical trend of operating revenue growth. A Jan. 1, 2015 rate increase helped propel an estimated 10% growth in fiscal 2015 revenues (unaudited). The DSOP has the authority to increase rates up to 3% a year without city council approval; and utilized capacity to increase rates accumulates. Rates are typically adjusted every three to five years.

The strong fiscal 2015 unaudited revenue performance is estimated to improve the DSCR to over 3x from 2.7x in fiscal 2014. With fiscal 2015 revenues well above budget, the DSOP increased the transfer to the city to $7.7 million from the budgeted $7.2 million. The transfer is not determined per a prescribed formula. The fiscal 2016 budget projects DSCR of just under 3x. Fitch expects future satisfactory DSCR, assuming that the DOSP implements future rate increases in accordance with the 2009 parking ordinance and continues to manage operating expenses.

There are no near term borrowing plans; approximately 25% of debt matures in 10 years. The three year capital improvement plan totals $29 million and includes the construction of three new garages. Funding is primarily from developer contributions as well as the sale of an existing property.

Fitch's base case projections, which assume no underlying volume growth, but a rate increase in in 2021, and 1% annual expenditure growth, shows DSCR falling to a low of 2.7x and the net debt to EBIDTA ratio declining annually to 2.2x by 2024. The rating case projections forecast no rate increase and higher expenditure growth of 3% per year. By 2024, the DSCR falls to 2.2x, and the net debt to EBIDTA ratio climbs to 3.9x.

The DOSP owns/manages nearly 34,000 parking spaces, split between over 9,800 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 whose appointment is approved by the city commission.