Miami-Dade County

Miami-Dade trash division hit with credit downgrade

Miami-Dade’s trash operation faces a cash crunch and is under pressure to raise fees on homeowners next year, according to a new Moody’s report that includes a downgrade of the division’s credit rating.

With less revenue from the county incinerator and some cities at risk of finding another trash service, Miami-Dade’s Solid Waste division needs higher fees for trash pick-up, according to administration officials. But the 2016 budget Mayor Carlos Gimenez plans to unveil next week will keep the fee flat at $439, extending a nine-year streak of flat fees, according to county finance chief Ed Marquez.

“We’ve got a few years to work on this,” said Marquez, a deputy mayor. “We have an issue in 2018.”

Last month, Gimenez sent a memo to commissioners outlining the cash squeeze detailed in the Moody’s report. He said his administration wanted to discuss higher fees for 2016 as a way to start phasing in the increases needed to close deficits that Solid Waste will begin to face in 2018 Those talks apparently did not go well, prompting a delay in a fee hike that Moody’s assumed was in the works.

“Given that many of the levers to raise revenue or cut expenses are constrained through contract, one of the few remaining options available is to raise the residential user fee,” Moody’s wrote in Thursday’s report. “At this time, management reports that it will propose a residential rate increase in FY 2016; approval will be subject to the Board of County Commissioners vote in September 2015.”

Moody’s lowered the rating on $110 million of debt pledged to Miami-Dade’s solid-waste revenues. The rating went from A2 to A3, which is the lowest rung on the “low credit risk” scale. The next rung down would be Baa1, where the risk is considered “moderate.” Moody’s affixed a “stable” outlook to the solid-waste debt.

The downgrade from the private credit-rating company means higher interest rates for the county’s Waste Management division, which handles trash pick-up throughout Miami-Dade and runs several landfills and an incinerator that generates electricity. Miami-Dade sells the power, and a contract with higher rates expired in late 2013. Budget figures show energy sales down from $31 million in 2013 to $11 million this year.

Moody’s cited lower energy sales along with the risk of losing revenue once many city solid-waste deals come up for renewal this fall. Cities have the option to contract with private operators and have trash sent out of the county, and Moody’s warns of “considerable” risk that Miami-Dade will lose business this fall.

Sarah Lee, a lead analyst for Moody’s who helped write the report, noted that only about 47 percent of the trash produced in Miami-Dade goes to Miami-Dade landfills, thanks to county regulations that let trash haulers send waste elsewhere.

The Moody’s report said Solid Waste plans to borrow about $225 million through 2020 for vehicle expenses and construction projects. It noted Solid Waste contributed $2.5 million in 2014 to the county’s Save our Seniors Homeowner’s Relief Fund, which doubles the homestead exemption for older low-income residents. Moody’s said the transfer left Solid Waste with less cash to absorb the kind of revenue squeeze it’s facing next year.

  Comments