Shaky municipal finances prompted Standard & Poor to slash the rating by two notches, meaning interest rates to build parking facilities at Marlins Ballpark will rise
A key agency has downgraded cash-strapped Miami's bond credit rating, a shift that will leave the public footing a higher bill for big-ticket projects, including parking garages for the new Marlins ballpark.
Standard & Poor's Ratings Services dropped two of the city's critical bond credit ratings by two notches, making it more expensive for Miami to borrow money at a time the city is scrambling to keep its budget afloat.
``That will have a significant impact on the cost of projects,'' said Tom Tew, a Miami securities attorney who has represented the city in the past. ``This is just another straw on the camel's back.''
Standard & Poor's lowered the rating for general obligation bonds -- usually backed by property taxes -- from A+ to A-, and the rating for bonds backed by other revenues from A to BBB+. The rating agency cited the city's climbing employee pension costs and unwillingness to raise taxes as reasons for its negative credit outlook.
``They have skepticism of the ability of the city to reduce expenses,'' City Manager Carlos Migoya said Thursday.
``I feel very confident that we'll be able to do that,'' he added -- possibly through employee union negotiations or layoffs.
The most immediate fallout: Funding for the city to build surface parking lots and four garages at the Marlins' new home in Little Havana.
Miami plans to float $104 million in bonds next month to finance the garages. Because of the lower bond rating, it will cost the city $15 million more to pay off those bonds over the next 30 years, the city manager estimated.
Migoya said that is about $15 million less than the garages would have cost over three decades if the city were building during boom times with higher construction prices.
The bonds will be paid off with money from a variety of sources, including a convention development tax generated by hotel sales and the average $10 the Marlins will pay the city to buy almost all of the parking spaces.
The manager said the credit downgrade should not delay construction. Work began this month after the city borrowed $3 million from a capital fund and received a $20 million bridge loan. The Marlins hope to begin play at the new ballpark on Opening Day in April 2012.
The rating downgrade is the latest dark financial cloud over the city.
Two months ago, another agency, Moody's Investors Service, shifted the city's credit outlook from a stable to a negative position, an indication that Miami's bond rating was poised to take a hit.
Miami leaders have had to raid the city's reserves to plug budget holes, including using $54 million from the rainy-day fund earlier this year to balance the 2009 budget.
The U.S. Securities and Exchange Commission continues to scrutinize whether the city hid its financial troubles from investors over the past three years, a review with potentially far-reaching budget implications.
Last week, city leaders discussed a controversial doomsday scenario: laying off more than 1,100 employees to fill a $100 million budget hole. Commissioners have sounded wary of raising taxes to cover the shortfall.
Against this backdrop, credit agencies are under pressure across the country to redo municipal bond ratings as home sales and property taxes -- local governments' main source of revenue -- tumble in the slumping economy.
Standard & Poor's noted Miami's historical difficulty with cutting expenses, and said cutbacks probably would not be enough without structural changes to labor contracts.
``The city's financial flexibility has been greatly reduced by growing fixed costs and limited tax-raising flexibility and willingness,'' the agency's report said, adding that the absence of ``considerable expenditure reductions could lead to further credit deterioration.''
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