PortMiami’s strained finances were on display this month when Miami-Dade borrowed $200 million on Wall Street to pay for the new port tunnel.
A memo summarizing the transaction shows Miami-Dade opted to pursue a floating-interest rate that resets each week, which could expose the county to much higher borrowing costs once the Federal Reserve backs off efforts to keep interest rates unusually low. Last year, when Miami-Dade borrowed $350 million for the port, it sold bonds with fixed interest rates.
“Given our druthers, we’d rather do the fixed rate,’’ said Frank Hinton, Miami-Dade’s director of bond administration.
Miami-Dade plans on budgeting an interest rate of about 2.4 percent a year for the 36 years it will take to pay back the debt, according to the memo from Mayor Carlos Gimenez. Since the county isn’t scheduled to pay down any of the original $200 million until 2043, that would mean an interest expense of about $150 million if the rate projection is correct. Hinton said there are no restrictions preventing the county from converting the debt to fixed-rate interest in the future.
Miami-Dade pledged cruise and cargo revenue to the payments, with a back-stop of general county funds if the revenue falls short. Moody’s, whose ratings help determine the terms that lenders demand from bond sellers, has downgraded PortMiami’s credit rating twice in one year. Moody’s cited concerns that port revenue would be strained in future years, given the facility’s $1 billion debt load.