Miami-Dade County Expressway Authority, Florida; Toll Roads Bridges

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1 Summary: Miami-Dade County Expressway Authority, Florida; Toll Roads Bridges Primary Credit Analyst: Adam Torres, New York (1) ; Secondary Contact: Peter V Murphy, New York (1) ; peter.murphy@standardandpoors.com Table Of Contents Rationale Outlook Related Criteria And Research MAY 20,

2 Summary: Miami-Dade County Expressway Authority, Florida; Toll Roads Bridges Credit Profile US$ mil toll sys rev bnds ser 2014A Long Term Rating A-/Stable New Miami Dade Cnty Expwy Auth toll sys Long Term Rating A-/Stable Affirmed Miami Dade Cnty Expwy Auth toll sys (FGIC) (ASSURED GTY - SEC MKT) (wrap of insured) Miami Dade Cnty Expwy Auth toll (AGM) Rationale Standard & Poor's Ratings Services has assigned its 'A-' rating to Miami-Dade County Expressway Authority (MDX), Fla.'s pro forma $323 million series 2014A toll system revenue bonds. At the same time, Standard & Poor's affirmed its 'A-' rating on MDX's toll system revenue bonds outstanding. The outlook is stable. Bond proceeds will fund a portion of the authority's five-year capital plan. The rating reflects what we consider to be the following credit strengths: The critical links that the urban toll system provides within the Miami-Dade County region roadway network, featuring moderate-to-significant time savings compared with travel times on free alternative routes; Operating revenue benefits from continuing the open-road tolling (ORT) conversion, thereby reducing the share of users who exit before paying tolls; and Strong liquidity, with $89 million in unrestricted cash in fiscal 2013 (year ended June 30), or nearly 1,200 days' cash on hand. We expect liquidity to remain strong in terms of a days' cash basis, although we note the planned spending in conjunction with the capital program. In our view, credit concerns include: A large capital plan that could result in additional debt should certain projects be added within the five-year period; and A rising debt service schedule, which could stress traffic and revenue growth. Debt following this issuance totals about $1.57 billion of parity senior bonds and $28 million in a combination of toll facilities revolving trust fund loans and state infrastructure bank loans, both of which are subordinate and which we do not rate. Parity bonds include $241.4 million in series 2005 auction rate securities that have been converted to a floating mode, subsequently swapped to fixed. The remaining bonds are fixed-rate. MAY 20,

3 Net system revenues secure the bonds. We believe certain bond provisions are fairly typical. They include a 1.20x rate covenant and a debt service reserve funded to the standard IRS maximum, which the authority has to date met with cash. However, we believe the additional bonds test is somewhat permissive, in that it incorporates projected net revenues only meeting pro forma debt service requirements at the rate covenant, with additional flexibility to include toll rate increases scheduled to take effect. MDX was created in 1994 to operate and expand the existing system as well as build other regional transportation projects on an expressway system within Dade County. The 33-mile system includes five expressways running primarily east-west through the metropolitan Miami area. The system is overwhelmingly an urban commuter system, with 98% of revenue coming from two-axle vehicles. The five expressways include: Don Shula (South Dade) Expressway (SR 874): Opened in 1974, the SR 874 runs for 7.2 miles connecting southwest suburban areas of the county; Gratigny Parkway (SR 924): Opened in 1992, SR 924 runs 5.4 miles and connects Broward County via Interstate 75 and from the Palmetto Expressway in northwest Miami-Dade County to major arterials in northern Miami-Dade County, which connect to Interstate 95 (I-95); Snapper Creek Expressway (SR 878): Opened in 1980, the SR 878 runs 3.0 miles and connects the SR 874 to US Highway 1; Airport Expressway (SR 112): Opened in 1961, SR 112 runs 4.1 miles from Miami International Airport on the west to I-95 on the east; and Dolphin (East-West) Expressway (SR 836): Opened in 1969, SR 836 runs 14.0 miles through downtown Miami, to Miami International Airport and to the central and western parts of the county. MDX is continuing to implement ORT and remove toll plazas; eventually, all tolls will be collected electronically via either SunPass (the current electronic tolling system) or video tolling (toll-by-plate). This will enable the authority to capture drivers who don't currently pay a toll. Three of the five expressways (Don Shula, Gratigny Parkway, and Snapper Creek) are ORT facilities and have no untolled movements. Management expects the last two roads to complete full conversion to ORT (and thus the full system) during fiscal As such, currently both the Airport Expressway and Dolphin Expressway still have a mix of tolled and free-movement opportunities, the latter of which will be closed upon full ORT conversion, thus significantly increasing toll-paying transactions. The existing cash-paying options will also cease upon conversion. The first three expressways' conversion to ORT and closure to free movements occurred in 2010, dramatically increasing transactions year-over-year in fiscal 2011, by 88%. Fiscal 2012 transactions increased 5.7% and another 2.1% in 2013, to 238 million. Toll revenues have not moved in lockstep with transactions percentagewise; traffic movements that had previously been free were likewise uncounted, and the toll rates on each expressway have been spread out among multiple collection points, to effectively retain the same overall toll rate. A traffic and revenue study performed in conjunction with this issuance included the time covered under the five-year CIP. The study assumed no further toll increases; although the board has approved indexing all users to CPI beginning July 1, 2017, this would only take place for the last two years of the current five-year capital program. The study projects transaction growth of just 2.1% in 2014, before ORT is fully implemented. Thereafter, transaction growth MAY 20,

4 jumps 48% in 2015, due to the ORT conversion and certain interchange improvements; and 26% for 2016, because that is the first full year of full ORT implementation. Transaction growth thereafter ranges from 2.9%-3.6% annually, reflecting a combination of economic growth and scheduled access-road construction projects that we expect will have a materially positive effect on MDX traffic. Revenue projections call for an increase from $126 million in 2014 to $180 million in 2015, and $216 million in 2017 (43% and 20%, respectively). In this case, there is an allowance that not all toll-by-plate customers will fully translate to recognized revenue. In 2013, senior-lien DSC was 1.57x per MDX calculations, and 1.48x per ours. The difference stems from our calculation excluding capital contributions from the definition of revenues, to count only what we consider to be recurring revenues, although we recognize that the bond indenture allows for their inclusion. In either case, this is a rebound from the recent five-year low of 1.37x and 1.23x, respectively, in In 2013, net revenues available for debt service totaled $111.5 million under our calculations, and $118.4 million by authority calculations, the latter of which we note is allowed under the indenture. As for fiscal 2014, net revenues as per MDX are budgeted at about 1.5x on a senior basis, or 1.4x as per our calculations. Despite DSC ratios lower than the historical range, liquidity remains a key credit strength, which we expect will continue. The 2013 audit reported $89 million, or 1,168 days against that year's expenses, while management has reported a more recent figure of $87 million in the general fund. We understand management plans to maintain the general fund at $75 million-$85 million during the five-year capital program period, following transfers for pay-go projects. However, although on a days' cash basis the liquidity remains a source of strength, we believe it is low compared to total debt, with the most recent audited figure representing about 7% of total debt. The five-year capital plan (fiscal years ) is estimated to cost $879 million among four broad categories: Existing system improvements: $672 million (widening and reconstruction of existing system roadways, including interchanges and completing last two roadways to open road tolling); System expansion: $137 million (new roadways and alignments adjacent to existing system); Facility improvements: $53 million (non-routine maintenance including IT-related developments for full ORT conversion and dynamic messaging system); and New expressways: $9 million (new alignments of roads acquired by MDX to be included in the MDX system). The 2014A bonds is the only additional debt contemplated under the current program. Other sources include cash and equivalents already on hand and future revenues. Notably, both the system expansion and new expressways categories only include projects that are in study or concept-planning stages; the CIP does not include actual constructed projects nor any associated costs. The authority could issue additional debt should the program change, including the possibility of additional costs associated with construction projects added to the CIP. We believe that long-term projects that the current plan does not capture would only be debt-financed if they had associated increased revenue streams. Overall, we believe management has a good track record of project delivery. MDX has three swaps outstanding that are all structured as floating-to-fixed rate. The swaps have a total notional value of $241 million (each one-third of that amount, individually with JPMorgan Chase Bank N.A., Citibank N.A., and UBS AG), and a recent mark-to-market value placed the total swap portfolio at about $51 million, collectively in the counterparties' favor. If necessary, all termination payments are subordinate to debt service. We believe that the swap MAY 20,

5 portfolio presently does carry some risk to the authority, given certain rating triggers. Specifically, in the case of the JPMorgan swap, a collateral posting is required if the lowest of the three rating agencies are below A-/A3, and a letter of credit would be accepted. As to the Citi swap, there is no collateral posting requirement, and the termination rating trigger is sufficiently distant from the authority's current rating to not pose a risk, in our opinion. Finally, UBS cannot require MDX to post collateral due to an injunction against its associated insurer (Ambac Assurance Corp.). We further note that management has indicated that should any postings be required, it may use the authority's rate-stabilization account while determining more permanent financing, as per a recent debt management policy. Outlook The stable outlook reflects our expectation that traffic and revenue will continue to be stable or increase in the next two years. More broadly, we expect MDX will continue toward full ORT conversion and complete closure to free traffic movements. If, in the next two years, traffic and revenue decline considerably, or if DSC erodes, we could lower the rating. We could also take a negative rating action if the authority adds more debt absent a corresponding revenue enhancement program, or if the planned ORT conversion is significantly delayed beyond fiscal We are unlikely to raise the rating during our outlook period given the continued ORT conversion. Related Criteria And Research Related Criteria Toll Road And Bridge Revenue Bonds In The U.S. And Canada, Feb. 25, 2014 USPF Criteria: Contingent Liquidity Risks, March 5, 2012 Ratings Detail (As Of May 20, 2014) Miami Dade Cnty Expwy Auth toll sys (wrap of insured) (AMBAC & BHAC) (SEC MKT) Miami Dade Cnty Expwy Auth toll sys (wrap of insured) (AMBAC, AGM & BHAC) (SEC MKT) Miami Dade Cnty Expwy Auth toll sys (wrap of insured) (FGIC & AGM) (SEC MKT) Miami Dade Cnty Expwy Auth toll sys (wrap of insured) (FGIC & BHAC) (SEC MKT) Miami Dade Cnty Expwy Auth toll sys Miami Dade Cnty Expwy Auth toll sys rev Many issues are enhanced by bond insurance. Complete ratings information is available to subscribers of RatingsDirect at All ratings MAY 20,

6 affected by this rating action can be found on Standard & Poor's public Web site at Use the Ratings search box located in the left column. MAY 20,

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