Fitch Affirms Miami-Dade Expressway Auth, FL's Revs at 'A-'

Fitch Ratings has affirmed the 'A-' rating on Miami-Dade County Expressway Authority, FL's (MDX) approximately $1.24 billion outstanding revenue bonds. The Rating Outlook on all bonds is Stable.

RATING RATIONALE:

The rating reflects the essentiality of the MDX system to commuters in the Miami area, coupled with a demonstrated willingness and ability to implement toll increases. Fitch has been monitoring FL House Bill 353 and FL Senate Bill 772 which could result in significant changes at the authority. At this time, it appears that a number of the proposed changes impacting MDX's tolling abilities are not likely to proceed while a number of ethics changes are likely to move forward. Fitch notes MDX currently maintains standards that meet the proposed changes to ethics standards.

KEY RATING DRIVERS:

Stable Commuter Base With Strategic Importance: The MDX system has a mature traffic profile of over 237 million annual toll transactions and is a critical link to the Miami-Dade transportation network. Limited alternative routes enhance the importance of the system to the region. Transactions are expected to increase substantially in the next few years as open road tolling (ORT) is implemented on all expressways by Fiscal Year 2016.

Revenue Risk - Volume: Stronger

Moderate Price Flexibility: MDX currently has moderate toll rates with solid economic rate-making ability. The system focuses on the future tolling of untolled traffic to provide additional revenue. MDX adopted a toll policy in which tolls will be indexed to the consumer price index (CPI) beginning in fiscal year (FY; ended June 30) 2018. Nevertheless, there are inherent political risks associated with toll increases especially if economic conditions deteriorate.

Revenue Risk - Price: Midrange

Good Physical Condition of Assets: MDX has maintained the system and its facilities in excellent condition. MDX's FY 2015-FY 2019 work program is moderate at $879.2 million with approximately $480 million of new money planned to fund the program.

Infrastructure Development/Renewal: Stronger

Some Exposure to Variable-Rate Debt: MDX's debt portfolio is 80% fixed rate, with the remainder in variable-rate mode with moderately escalating debt service profile. The debt service reserve is cash funded at maximum annual debt service (MADS).

Debt Structure: Midrange

Moderate Leverage and Healthy Financial Metrics: FY 2013 net debt to cash flow available for debt service (CFADS) was 8.7x and is consistent with peer facilities. Debt service coverage has historically been above 1.5x. FY 2013 debt service coverage increased to 1.56x from 1.37x in FY 2012 due to higher than anticipated net toll revenues and a substantial decline in operating and maintenance (O&M) costs attributable to a release of prior years' accrual of costs related to an on-going litigation with a vendor.

RATING SENSITIVITIES:

-- Limited future financial flexibility upon completion of ORT system wide including previously untolled traffic movements or other factors which materially erode debt service coverage ratios (DSCR) below 1.4x for a 3-5 year period may lead to negative rating action.

-- Should MDX's ability to levy planned toll rate increases become legally impaired, ratings will be negatively affected.

--Management's ability to prudently contain operating and maintenance expense growth and pass-through costs (indirect expenses) associated with ORT while proactively maintaining service levels and successful delivery of MDX's large-scale capital program, along with timely toll increases that enhance financial flexibility, resulting in debt service coverage ratios (DSCRs) above 1.60x, would reflect improved credit quality.

SECURITY:

The bonds are secured by a pledge of and lien on the net revenues of the authority.

CREDIT UPDATE:

FY 2013 transactions grew to 237.5 million from 232.7 million in 2012 or, 2.7%. For the first four months of FY 2014 (through Oct. 31) transactions are up 2.7% while net toll and fee revenues are tracking approximately 4.2% lower due to some toll collection related issues. MDX currently estimates FY 2014 net toll revenues to decrease by 6.6% to $125.5 million from $134.4 million due to the aforementioned issues related to toll collections.

In 2013, operating expenses declined 23%, largely due to a release of a prior year's accrual related to on-going litigation with the authority's back office support services provider. The release of the accrual was based on the presiding judge granting a Motion of Partial Summary Judgment in favor of the authority. FY 2014 operating expenses are expected to increase to approximately $35.9 million from $27.7 million, or roughly 29% due to increased costs associated with toll equipment conversions and additional operating expenses. Fitch expects MDX management will continue to carefully manage costs after finalizing ORT initiatives. MDX management has a proven ability to manage expenses and cut costs during non-expansionary years as demonstrated by significant expense reductions in FY 2010.

FY 2013 DSCR grew to 1.56x from 1.37x in FY 2012. The increase is due primarily to the aforementioned increases in toll revenues and favorable operating expense results. Management currently projects DSCR to decline in FY 2014 due to lower toll revenues but rebound in FY 2015 to 1.70x. Fitch notes that MDX has prudently incorporated a number of conservative assumptions by forecasting limited traffic growth. To the extent that a deterioration in economic conditions impacts traffic growth or expense growth is not contained, financial flexibility may become more constrained.

MDX's 2015-2019 $879.2 million work program primarily includes improvements to various interchanges, reconstruction of certain portions of the system, ORT initiatives on the portion not yet converted and digital messaging boards as well as ongoing renewal and replacement projects aimed at system preservation. The authority expects to issue approximately $480 million to finance a portion of its work program with the remainder from cash.

MDX was formed in 1994 and is a public instrumentality and agency of the State of Florida. MDX is responsible for operating, maintaining and improving an expressway system that currently includes the Airport Expressway (SR-112), the East-West (Dolphin) Expressway (SR-836), the South Dade (Don Shula) Expressway (SR-874), the Gratigny Parkway (SR-924), and the Snapper Creek Expressway (SR-878).

Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012);

--'Rating Criteria for Toll Roads, Bridges, and Tunnels' (Oct. 16, 2013).

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012);

--'Rating Criteria for Toll Roads, Bridges, and Tunnels' (Oct. 16, 2013).

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867

Rating Criteria for Toll Roads, Bridges and Tunnels

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720736

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827693

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