Don’t look to Wall Street to sort out Miami’s complicated finances.
On Tuesday, Moody’s Investors Service issued a negative outlook for some of the city’s outstanding bond obligations, and gave a below-average rating to a bond issue expected to close next month.
Fitch Ratings, meanwhile, upgraded the outlook for the outstanding bond issues from negative to stable. But it, too, gave a subpar grade to the new bonds.
The mixed bag of ratings came one week after Budget Director Danny Alfonso announced that Miami closed the fiscal year with an unexpected $37 million surplus. The city’s computer system put the figure at $45 million, but Alfonso said several transactions had yet to post.
Fitch called the year-end surplus “impressive,” and noted that Miami had managed to boost its overall reserves to $54 million, or about 11 percent of spending.
“I’m extremely pleased that we’ve improved” our rating, City Manager Johnny Martinez said Tuesday. “They’ve been watching the things that we’ve been doing as far as building our fund balance and living within our means.”
Governments sell bonds on Wall Street as a way to borrow money, with bond buyers collecting interest and principal payments from the issuers in the same way a bank makes money off home mortgages. The ratings reflect the likelihood that any issuer will continue making bond payments, with a lower rating suggesting a higher risk of default.
Fitch assigned the city’s latest bond issue a BBB+ rating — a below-average grade for a municipal security.
The $45 million bond issue, which was approved by the City Commission Monday and will likely be sold in early December, will pay off a short-term loan that financed Miami’s share of the PortMiami tunnel dig.
Fitch Analyst Michael Rinaldi said the committee had expressed concern over recent turnover in the city’s finance department.
Said Martinez: “I wish the rating had been a little bit higher.”
Moody’s also assigned a mediocre grade to the tunnel bonds — an A3 rating — and described the outlook as negative.
“The negative outlook reflects the city’s ongoing challenges to control high fixed costs, uncertainties associated with key managerial turnover and the ongoing [U.S. Securities and Exchange Commission] investigation,” Moody’s analysts wrote.
Earlier in the year, Moody’s put Miami under review for a potential credit downgrade after the SEC announced intentions to file civil fraud charges against the city. The review was expanded when several key finance officials resigned their posts.
At the end of the review, the ratings stayed consistent, Moody’s spokesman David Jacobson said.
On the whole, Commission Vice Chairman Marc Sarnoff said, the news was positive.
“The needle is moving in the right direction,” Sarnoff said. “The gas tank is starting to get full.”