Bonds

S&P raises city of Miami one notch to AA

S&P Global Ratings Services raised the city of Miami, Florida’s long-term and underlying ratings on its limited ad valorem bonds and non-ad valorem bonds to AA from AA-minus. The outlook is stable.

“The upgrade reflects our view of Miami’s economic growth and income improvement, coupled with moderation of debt,” S&P said last week.

“While everyone is watching the federal government experience a debt crisis and come close to defaulting on our nation’s debt for the first time in history, Miami’s credit rating was just recently upgraded — meaning that Miami’s government has never been in better financial health,” Mayor Francis Suarez said on Tuesday.

S&P said its rating on Miami is supported by its view of the city’s solid tax base growth, healthy labor market and role as an anchor for the Miami-Fort Lauderdale metropolitan statistical area.

The agency also cited an estimated improvement in net performance and reserves for fiscal 2022, although these could be pressured in the long term due to high fixed costs, labor contract renegotiations and the city’s additional debt plans.

S&P also looked at the environmental, social, and governance factors that could affect the city.

“We view the city’s environmental risks as elevated, given Miami’s location and susceptibility to acute and chronic physical risks,” S&P said. “The city projects the sea level to rise 14-21 inches by 2070; however, Miami maintains a standing committee to address capital improvements and risk mitigants related to sea levels, and passed a general obligation bond measure that, in part, is designed to directly address projects related to rising sea levels.”

S&P said its stable outlook “incorporates our forward-looking view that Miami will maintain a stable credit profile given its robust economic growth and good financial profile. We do not expect to change the rating within the two-year outlook horizon.”

“This [rating upgrade] was accomplished while reducing our taxes to the lowest rate in history, maintaining a savings of $188 million in cash and having a mid-year surplus of around $30 million,” Suarez said. “It’s no wonder why we continue to be number one in wage growth. And have the lowest unemployment in America.”

The city has an Aa2 long-term issuer rating from Moody’s Investors Service while its senior revenue bonds are rated A3. The credit has a stable outlook.

Fitch Ratings assigns an AA rating to Miami’s issuer default rating and an AA-minus to the city’s special obligation non-ad valorem revenue bonds. The outlook is stable.

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