Miami considering bond issue to pay off $45 million PortMiami tunnel loan
The Miami City Commission will consider issuing new bonds to pay off a $45 million bank loan that financed part of the PortMiami tunnel dig.
10/01/2012 7:01 PM
10/01/2012 7:21 PM
Despite ongoing federal scrutiny into recent bond issues, Miami officials are moving forward with a plan to pay off a $45 million bank loan by issuing more public debt.
The loan, which is held by Wells Fargo bank, financed Miami’s share of the PortMiami tunnel dig. It must be paid off in January.
City officials had been pursuing private financing options. But Miami’s financial advisor and bond counsel recommended a bond issue instead, saying the process would save Miami more than $5 million and be more open to public review.
The city’s finance advisory committee approved the recommendation Monday. It will go before the City Commission later this month.
Chief Financial Officer Janice Larned said she hopes to have the bond issue wrapped up before Thanksgiving.
“That way we can pay Wells Fargo and have a nice holiday,” she said.
Commissioners expressed serious concern about the bank loan at a budget hearing last week.
The Omni Community Redevelopment Agency, a quasi-independent city board that oversees a special taxing district, is responsible for funding Miami’s portion of the tunnel project. But it was the city that took out the loan — and is responsible for the January payment.
If the commission approves the bond issue, the city will issue the bonds. The CRA will make the debt service payments using some of the special tax dollars it collects for neighborhood redevelopment efforts.
CRA Director Pieter Bockweg said he does not anticipate dipping into city coffers.
“We do have the revenues available to make the debt service payments for the city,” he said.
Miami’s general fund, however, would serve as the ultimate backstop, finance director Stephen Petty said.
City leaders will have to move forward cautiously. Miami is under investigation in connection with two earlier bond issues.
This summer, the U.S. Securities & Exchange Commission concluded that Miami had misrepresented its financial situation to investors before issuing bonds to finance street and sidewalk repairs. The SEC may seek civil fines.
The SEC is also looking into the bonds that financed the Miami Marlins parking garages.
City Attorney Julie O. Bru said the two probes have no bearing on the proposed bond issue to pay off the bank loan.
“We have no reason to believe it is inappropriate for the city to be participating in public markets,” Bru said.
Albert A. del Castillo, who serves as special bond counsel for the city, said Miami would disclose all relevant details to potential investors.
He noted that the bond issue would be limited to “qualified institutional buyers,” meaning institutions that manage at least $100 million in securities.
“We want to make sure that, in the current environment, we are careful about who we issue bonds to,” del Castillo said. “These are sophisticated investors who can do the due diligence.”
Earlier this summer, Bockweg had said the CRA was leaning toward private financing to pay off the bank loan.
City officials received a proposal from Gates Group Capital Partners, which wanted to loan Miami $48 million by taking control of a city-owned building as collateral.
Del Castillo said that structure was unnecessary “to refinance a simple bank loan.”
But Jorge Arrizurieta, who represented Gates at the finance committee meeting, blasted the city for what he called negotiating in bad faith. He said Miami had only entertained the Gates proposal to negotiate a better deal on the bond issue.
Commissioner Frank Carollo said issuing bonds would be “much cleaner” than obtaining private equity.
“This is the route we needed to go,” he said. “But we need to move quickly. Time is running out.”
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