OREANDA-NEWS. Fitch Ratings has assigned a rating of 'AA-' to the following revenue bonds to be issued by Miami-Dade County, Florida:

--\$192,220,000 transit system sales surtax revenue refunding bonds, series 2015.

The bonds will be sold on May 12 via negotiation. Proceeds will refund the county's outstanding transit system sales surtax revenue bonds, series 2006 (2016-2036 maturities) and series 2008 (2020-2026 maturities) for savings without extending final maturity. Estimated NPV savings are \$18 million or 8.7% of refunded bonds.

Fitch also affirms the following ratings:

--\$1.4 billion (pre refunding) transit system sales surtax revenue bonds, series 2012, 2010A, 2010B, 2009A, 2009B, 2008, and 2006 at 'AA-';
--\$77.4 million public facilities revenue bonds (Jackson Health System), series 2009 at 'AA-'.

The Rating Outlook is Stable.

SECURITY
The transit system sales surtax revenue bonds are principally payable from a first lien on 80% of the receipts of a 1/2-cent sales surtax levied countywide, collected by the state, and distributed to the county on a monthly basis net of an administrative fee not to exceed 3%. The sales tax is imposed on all transactions occurring in the county that are subject to the state tax on sales, use, services, rentals, and admissions. The bonds are secured by a debt service reserve largely funded with cash (\$76.5 million).

The public facilities revenue bonds are payable in the first instance by the gross revenues of the Public Health Trust (PHT), an independent body responsible for the governance, operation, and maintenance of certain county health facilities. The bonds are additionally backed by the county's covenant to budget and appropriate non-ad valorem revenues to replenish any draws from the debt service reserve fund on an ongoing basis which serves as the basis for the Fitch rating.

KEY RATING DRIVERS

GOOD COVERAGE ON TRANSIT BONDS: The 'AA-' rating on the transit system sales surtax revenue bonds reflect the broad-based nature of the pledged revenue stream and expectations for continued good debt service coverage factoring in the county's significant additional issuance plans.

ADEQUATE FINANCIAL POSITION: General fund operating results have been variable over an extended period, and often sensitive to broader economic conditions that affect its property and sales tax revenue streams. Reserve levels have improved from the trough of the recession, providing a good cushion against unanticipated budgetary pressures. Good revenue raising capacity exists under statutory property tax limits. Expense pressures are driven by labor costs and contributions to health and transit operations, which warrant close attention over time.

MANAGABLE LIABILITY PROFILE: Overall debt levels are expected to remain moderate. Pension benefits are largely provided by the Florida Retirement System and a fully funded county sponsored plan for certain employees of the Public Health Trust. The cost of funding the county's debt, pension, and retiree health liabilities consumes an affordable share of the governmental fund budget.

ECONOMY VIEWED FAVORABLY: Fitch expects the broad expanse of the economy and its significant depth to stimulate growth and lend stability to the rating over time.

COVENANT DEBT: The rating on the public facilities revenue bonds (Jackson Health System) reflects the county's general credit quality and its covenant to budget and appropriate non-ad valorem revenues to secure bondholders.

RATING SENSITIVITIES

SPECIAL TAX BONDS: Fitch believes there is adequate capacity in the existing revenue base to absorb the significant amount of additional debt planned, including under Fitch's revenue stress test, but material weakening in coverage below expectations would pressure the rating.

FINANCIAL CUSHION: Fitch considers the maintenance of an adequate reserve position as important to the county's general creditworthiness. Erosion of reserve levels over time would be inconsistent with the current rating.

CREDIT PROFILE

GOOD COVERAGE ANTICIPATED DESPITE LARGE ISSUANCE PLANS

The 'AA-' rating assigned to the transit system sales surtax revenue bonds reflects Fitch's expectation for adequate debt service coverage over the life of the bonds taking into account conservative revenue growth assumptions and significant additional debt issuance to fund MDT capital needs. Fiscal year 2014 pledged revenues increased by 5.5% on the year to \$182.4 million or 1.78x MADS. Recent revenue performance has been strong; pledged sales tax have increased at a 5.7% CAGR in the last five years following declines of 2.5% and 7.4% in fiscal years 2008 and 2009, respectively.

Coverage ratios are expected to draw closer to the 1.5x additional bonds test for parity indebtedness (1.25x for subordinate debt) as the county plans to sell \$431 million of additional transit system sales surtax revenue bonds in fiscal year 2016 and an additional \$170 million prior to fiscal year 2021. Fitch applied a stress forecast with annual declines of 3% and 8% mirroring the revenue experience during the Great Recession at 10-year intervals, followed by annual growth between 2% and 5% (for an overall CAGR of 1.3%). Under these assumptions the minimum and median debt service coverage ratios of 1.42x and 1.64x are considered satisfactory for the 'AA-' rating, all other factors being equal.

ADEQUATE RESERVE POSITION

Audited county financial statements for fiscal year 2014 depict an unrestricted general fund balance totaling \$195.2 million, equal to 9.9% of operating expenditures and transfers out. The unrestricted fund balance is comprised in part of \$70 million (3.7%) of unassigned reserves and \$101.1 million (5.4%) allocated for subsequent year spending. The county has assigned, on average, \$114.3 million of its reserves for subsequent spending the last four fiscal years. This reserve classification reflects, in part, state law that requires counties budget 95% of expected revenue each year.

The county's reserve position is considered adequate at somewhat below the 'AA'-category median but comparable to similarly rated and sized U.S. counties. Reserve stability remains an important rating factor going forward, considering the county's historically elevated level of general fund revenue volatility (annual declines of \$121.1 million and \$125.2 million in fiscal years 2010 and 2012, respectively, for example). Governmental fund cash and investments at the close of fiscal year 2014 totaled \$1.3 billion, or more than four months of operating spending.

IMPROVED FINANCIAL FORECAST

The fiscal year 2014 audit depicts a \$29.6 million operating deficit after transfers in the general fund. This would mark the third consecutive year a drawdown of the general fund balance has occurred. The deficits have widened each year but to date appear manageable in the context of a general fund budget that nears \$1.9 billion in spending. Importantly the county's revenue outlook appears improved from recent past. General fund revenues increased for the first time in six years in fiscal year 2014 by \$66.6 million or 3.6%. Property taxes and state shared sources (including the half-cent local government sales tax) were up \$45 million and \$12 million, respectively. Property taxes, the largest revenue item in the budget at roughly 50%, benefited from taxable assessed value (TAV) growth of 6.7% in fiscal year 2014. The county's five-year financial forecast is based on fairly reasonable revenue assumptions that, despite certain spending challenges noted below, are expected to help grow the emergency contingency reserve from the current level of \$43 million to \$78 million (this is a budgeted reserve, included as part of the unassigned fund balance). The county's forecast does not reflect an increase in the millage rate. Fitch views the county's legal capacity to increase taxes as good; the fiscal year 2015 total direct tax rate of 6.69 mills is well within the statutory 10 mill limit.

County spending pressures include the general fund's support for Miami-Dade Transit (MDT) and Jackson Memorial Hospital (JMH), budgeted at \$168 million and \$147 million, respectively, in fiscal 2015. These appropriations are based on a maintenance of effort formula that generally limits spending flexibility. The county reports having eliminated 2,500 positions over the last three years alone, raising questions as to whether additional reductions could be made, if necessary, without affecting service delivery. Decisions on labor will continue to have a significant impact on the county's financial position. Agreements with labor unions representing about one-half of the total workforce were reached this year. The new contracts include certain health care plan redesigns that are estimated to yield \$50 million in savings government wide, once implemented for all employees. The health savings, if realized, will only help offset the costs associated with the board of county commissioners vote to discontinue effective Jan. 1, 2015 a 5% employee healthcare contribution (for employees covered under collective bargaining) estimated at \$80 million government wide and \$24 million for the general fund.

MODERATE DEBT AND RETIREE LIABILITIES

Fitch estimates the county's overall debt at a moderate 3.4% of market value or \$3,460 per capita. Near term issuance plans are not expected to increase debt ratios materially despite a slow rate of outstanding principal amortization (less than 40% of general government debt repaid in 10 years). The county continues to advance an extensive capital improvement plan (CIP) totaling \$10.4 billion through fiscal 2020. The major component of the CIP, the water and sewer department, accounts for \$5.1 billion ultimately funded by user fees and grants. The transit component of the CIP totals \$858 million, expected to be funded from prior year sources and additional transit system sales surtax revenue bonds noted previously.

Retiree pension benefits are offered through the Florida Retirement System (FRS) and a separate single employer defined benefit plan for employees of the Public Health Trust. FRS is funded at 86.6% as of July 1, 2014 on a reported basis; the county makes the full required contribution to FRS as established by the state legislature. The PHT pension plan is reported at 101% funded as of Jan. 1, 2014 (or 95.7% as adjusted by Fitch for a 7% investment rate of return). The county's unfunded liability for other post-employment benefits (OPEB) was most recently reported at \$400 million or a very low 0.2% of market value; OPEB benefits are explicitly subsidized by the county at a fixed 2008 dollar level. The cost of funding the county's outstanding general government debt, pension, and OPEB liabilities consumes a moderate 17% of spending.

FAVORABLE LONG-TERM ECONOMIC PROSPECTS

Fitch believes Miami-Dade's economic fundamentals remain an important credit strength. Total non-farm employment in the Miami-Fort Lauderdale-Miami Beach metropolitan statistical area (MSA) is significant at 2.5 million and well represented across employment sectors. Good job growth has reduced the county's unemployment rate to 5.4% in February down from 7.1% in the same month a year earlier. Certain vulnerability exists given a dependence on housing and tourism, which is the case for most local governments in Florida. Home prices continue to rebound strongly, and the attractiveness of the Miami market is reflected in a full market value per capita exceeding \$100,000.

The county owns and operates significant transportation assets, most notably the Port of Miami and Miami International Airport, which support its role as an international gateway, particularly to Latin America and the Caribbean. A desirable geographic location and abundance of recreational amenities position Miami as a significant destination for leisure travelers and retirees. Economic activity driven by visitors somewhat tempers the weak income and poverty metrics of the county.

JACKSON HEALTH BOND RATING REFLECTS COUNTY CREDIT QUALITY

The 'AA-' rating on the public facilities bonds reflects the county's covenant to budget and appropriate sufficient non-ad valorem revenue to replenish any draws from the DSRF. The county's legally available non-ad valorem revenue is considerable, reported at \$839.6 million in fiscal year 2013 after deduction of debt service on bonds payable from a lien on such sources. Fitch notes that despite a history of operating difficulties at Jackson Memorial and rate covenant violations the DSRF (funded with cash equal to MADS of \$24.9 million) has not been tapped to pay bondholders. Significant operating expense reductions has led to much improved hospital net revenue performance, with the county reporting debt service coverage at 5.1x in fiscal year 2013 and 4.0x in fiscal year 2014.