MOODY'S ASSIGNS Aa3 RATING TO MIAMI-DADE COUNTY'S (FL) CAPITAL ASSET ACQUISITION BONDS, SERIES 2011 A&B; OUTLOOK NEGATIVE

AFFIRMS Aa3 RATING ON PARITY NON-AD VALOREM BONDS AND Aa2 RATING ON G.O. ULT BONDS; OUTLOOKS NEGATIVE

County
FL

NEW YORK, Aug 3, 2011 -- Moody's Investors Service has assigned a Aa3 rating to Miami-Dade County's (FL) $26.5 million Capital Asset Acquisition Bonds, Series 2011A and $9 million Series 2011B (Taxable). The outlook is negative. At the same time, Moody's is affirming the Aa3 rating on all outstanding rated non-ad valorem obligations and Aa2 rating on the county's outstanding G.O. ULT bonds; the outlooks are negative. The bonds are payable from the county's covenant to budget and appropriate legally-available non-ad valorem revenue (after payment of essential services and bonds having a prior claim on certain non-ad valorem funds).

Proceeds of the Series 2011A and Series 2011B bonds are to help fund the county's financial obligations related to the construction of a new baseball stadium for the Florida Marlins. Legal security includes a liberal anti-dilution test and no debt service reserve on these offerings.

RATINGS RATIONALE

The Aa3 rating considers the county's favorable level of available non-ad valorem revenues, although the county's narrow financial position, exacerbated by ongoing tax base declines, places material stress on non-ad valorem funds which have become increasingly important in funding ongoing county operations. The expected self-supporting nature of debt service on the majority of non-ad valorem obligations (primarily from various county enterprises) is an important rating factor. The negative outlook recognizes the county's materially-weakened financial condition and continuing depressed economic indices. Also, the severely-weakened financial condition of the county-owned hospital (Jackson Health Care System) could potentially require an additional county financial commitment, which would weigh heavily on the county's credit.

STRENGTHS

- County's sizable and diverse economic and tax base

CHALLENGES

- County's ongoing depressed economic conditions

- County's rebuilding cash and reserves in an adverse revenue environment

DETAILED CREDIT DISCUSSION

FAVORABLE PROTECTION AFFORDED BY LEGALLY-AVAILABLE NON-AD VALOREM REVENUES

Moody's believes that while the county's covenant to budget and appropriate from legally-available non-ad valorem revenues affords favorable security, the county's use of these revenues to support a very significant amount of county obligations (directly and indirectly) dilutes its effectiveness. The county has identified approximately $858.6 million in available non-ad valorem funds in fiscal 2010 in relation to $168.8 million in MADS (2012) for all non-ad valorem obligations (including the current issue and self-supporting obligations paid from enterprise funds) either paid from non-ad valorem funds or ultimately backed by non-ad valorem funds. Only about 25.1% of all non-ad valorem total debt service is actually paid from covenant revenues, with the remainder paid from other county sources, primarily enterprise revenues. The county's covenant pledge either supports or is the ultimate security for over $2.16 billion in varied county bonds and loans.

Non ad valorem revenues, which are used to pay operating expenses, are an increasingly important budgetary funding component, as property taxes continue to decline due to both the weakened economy and statewide tax reform. Total available non-ad valorem revenues declined over 16% in the last three years through fiscal 2010 from their high in fiscal 2007 due to declines in several major revenue components including sales and other taxes as well as smaller appropriations from reserves. Non-ad valorem sources are diverse, with major components including: various non-property taxes, 17.0%; charges for various services, 26.5%; sales taxes, 12.9%; and, appropriable fund balance, 10.6%. A Florida Power and Light adjustment for rebates, required by the PSC, is estimated to result in a one-time $18.8 million decline in fiscal 2011 public service tax revenues, which is not expected to have a material impact on available non-ad valorem revenues given the level and diversity of non-ad valorem funds. Over-leveraging of this pledge could restrict future financial flexibility, especially as other revenues continue to stagnate. Additional non-ad valorem obligations are not precluded in the Ordinance.

COUNTY FINANCIAL OPERATIONS CHALLENGED BY DECLINES IN MAJOR REVENUE SOURCES; SIZABLE BUDGET CUTS IMPLEMENTED

Although county officials have taken steps to close recurring budget gaps caused by declines in major county revenue sources, targeted reserve levels remain narrow. Given the depressed economy and declining major revenue sources, additional budgetary challenges face officials going forward. Operating surpluses through fiscal 2007 improved cash and reserve levels considerably, with fiscal 2007 total General Fund balance increasing to 18.1% of revenues ($404.9 million), unreserved balance at 8.2% of revenues ($183.8 million), and the emergency contingency reserve at 2.8% ($62.9 million). The county's overall financial condition has narrowed since then through fiscal 2009 with a total $109 million reduction in General Fund balance to $296.3 million (14.1% of revenues) and an undesignated balance of $90.8 million (4.3% of revenues). However, the county's emergency contingency reserve increased to $72.9 million (3.5% of revenues) in fiscal 2009.

For fiscal 2010, there was only a marginal increase ($66,000) in total General Fund balance (to $296.5 million, about 15% of revenues) and a decline in emergency contingency reserves to $32.1 million (1.6% of revenues). The emergency contingency reserve is budgeted at $53 million in fiscal 2011 (3.28% of revenues). Additional reserves of about $34.6 million are also budgeted for fiscal 2011 and, together with the emergency contingency reserve, total $87.6 million or 5.4% of the operating budget. The county code requires rebuilding the reserve over a lengthy seven-year period but is loosely worded regarding annual contributions or total amount. Although plans were to add $18 million to $20 million to the emergency contingency reserve annually to achieve a self-determined level of $100 million, to date officials have been unsuccessful in making any significant progress in this regard. Also, future expected budgetary gaps would have to be addressed before this could occur. The 2011 operating budget includes a 13.4% tax rate increase and a modest $33.3 million of one-time revenues (excluding another $25.1 million budgeted transfer from the water and sewer system, which is expected to continue going forward).

Officials have made about $1.4 billion in cuts in total countywide budgets from fiscal 2008 to fiscal 2011, largely through expenditure reductions (significant internal and back-office support), collective bargaining concessions, use of one-time revenues (for both recurring and non-recurring expenses) and the elimination of roughly 3,058 positions (27,647 remaining). Budgetary reductions are material. In budget preparations for fiscal 2012 the county, due to a 2.8% tax base decline, an operating tax rate cut, and escalating operating costs, had to close an estimated $409 million budgetary gap. The gap is expected to be addressed with a $111 million reduction in state pension funding costs (with employees now contributing 3% of salary), $163 million in service and revenue adjustments, $135 million in employee concessions, and the elimination of 1,300 positions. Revenues also include a one-time $25 million loan from the water and sewer department (with repayment over several years) but no expected use of additional modest reserves. It is uncertain at this time whether the county will be successful in achieving the targeted level of employee concessions. Notwithstanding expected challenges of restoring budgetary structural balance despite a confluence of opposing factors, maintenance of adequate reserves for a government the size of Miami-Dade is an important rating criterion.

The county is self-insured for health care, and officials expect a manageable increase in employee contributions. The county has a $67 million self-insurance deficit at the end of fiscal 2010 which is expected to be reduced to $39 million at the end of fiscal 2011, and $11 million at the end of fiscal 2012. The county is part of the state-administered pension plan and is contributing 100% of the annual required contribution (ARC) for the pension program. A September 30, 2010 GASB 45 (OPEB) liability is estimated at $336.7 million with an annual required contribution (ARC) of $30.9 million. The county currently funds the OPEB ARC on a pay-as-you-go basis annually ($20.6 million in fiscal 2010). The county has no funds invested with the SBA currently, but maintains most of its investments in U.S. treasury and agency obligations with a smaller portion in commercial paper.

COUNTY HEALTH CARE SYSTEM'S CRITICAL FINANCIAL CONDITION COULD FURTHER STRAIN COUNTY FINANCES

The county's hospital system, Jackson Health System (JHS), is experiencing severe financial difficulties, with an extremely narrow 18.0 days cash on hand ($81 million) at the end of fiscal 2010. Cash is expected to decline to 14.6 days ($62 million) at the end of fiscal 2011. The hospital system was in violation of its rate covenant for fiscal 2009 and fiscal 2010 (September 30). In May 2011 the county disbanded the Trust's Board and replaced them with an independent, seven-member Financial Recovery Board. In addition, a new CEO and other senior hospital officials have been appointed, all in an effort to improve hospital operations and efficiencies. The county has $368.4 million in debt on behalf of the hospital that is backed-up by the covenant to budget and appropriate non-ad valorem revenues in the form of a Debt Service Reserve Fund replenishment. The debt is effectively paid from a health care sales tax from first funds that are received and paid directly to the county, acting as its own trustee. In addition to the health care sales tax, the county is required to contribute each year a maintenance of effort (MOE) amount no less than 80% of the General Fund support at the time of the tax levy. The MOE is calculated as 11.873% times the millage rate levied for countywide purposes in fiscal 2007 times 95% of the preliminary tax roll for the upcoming fiscal year, and by multiplying 11.873% on General Fund non-ad valorem revenues with the exception of local and state gas taxes. The county advanced both sales tax and MOE funds in fiscal 2010 to ease the cash flow crunch, but a similar request in fiscal 2011 was declined in favor of the administrative actions previously discussed. It is uncertain at this time whether further hospital financial deterioration would require the county to take over the hospital. Additional financial support from the county could further weaken the county's overall tenuous financial condition and weigh heavily on its credit strength.

The SEC is conducting an investigation of the Jackson Health System and has requested documentation related to the public offering of the PHT Series 2009 Bonds as part of a formal investigation of PHT's financial conditions and projections.

MODERATE DEBT LEVELS WITH MANAGEABLE NON-ENTERPRISE BORROWING EXPECTED

Moody's expects the county's debt burden to remain manageable given moderate non-enterprise borrowing expectations. The county has an overall debt burden of 2.3%, which is manageable given the size of the tax base and population. Debt service costs of about 6.3% of fiscal 2010 total operating revenues are moderate. The county's $20.1 billion multi-year capital program is heavily weighted towards enterprise systems and transportation. The plan is nearly 80% funded with debt, more than half of which has been issued, and includes projects presumed to be funded with debt, which may not be realized. County voters have approved a separate one-half cent sales tax for transportation, which Moody's believes will help fund the county's significant transportation infrastructure needs. The $2.925 billion general obligation bond authorization (Building Better Communities-BBC), approved by voters in 2004, addresses several segments of county infrastructure needs. Both of these authorizations reflect positively on county efforts to maintain and improve infrastructure. Currently, over 60% of the county's net direct debt is special tax debt, with the remainder being general obligation bonds. Non-enterprise borrowing plans over the next two fiscal years include the issuance of an estimated $200 million of the BBC (G.O.) authorization, and up to $322 million in additional non-ad valorem obligations (including $80 million for Jackson Memorial Health System) most of which is expected to be self-supporting.

Aside from two special tax issues that total $145.9 million (backed by TD Bank and Wells Fargo credit facilities), the county has the remainder of its non-ad valorem variable rate exposure related to bonds issued through the Sunshine State Loan Program ($289.4 million) which are related to, and paid by, the Seaport. The Sunshine State loans are backed by a JP Morgan letter of credit (expiring December 30, 2013). The JP Morgan facility has no rating triggers that would terminate the facility and any repayment of un-remarketed bonds would be at an increased rate over a three year term-out provision. There are also four non-enterprise basis swaps on special tax debt, $501.5 million notional amount, all requiring collateral posting (below the Baa1 rating level). No collateral posting is currently required. The swaps are with Loop Financial Products and are guaranteed by Deutsche Bank. Under the swaps: one has the county paying SIFMA divided by 0.604 and receiving LIBOR plus 1.77%; under two others, the county pays SIFMA divided by 0.604 and receives LIBOR plus 1.65343%; and under the fourth swap, the county pays SIFMA divided by 0.604 and receives LIBOR plus 1.43%. Recent mark-to-market values (July 18, 2011) on the swaps are a positive $23.4 million to the county. There are also about $140.7 million in various non-enterprise county debt service reserve sureties with several insurers whose ratings have been downgraded. In each instance, there is reportedly no stated requirement to substitute or fund those sureties in cash.

The county has obligations to 10 outstanding lease in-lease out (LILO) agreements that were defeased with guaranteed investment contracts (GICs) held by Ambac, FSA (rated Aa3) and AIG (rated Baa1). One agreement relates to the county's Metro Center, and nine relate to maintenance and parking facilities and technical equipment of the county's transit enterprise. Due to the downgrade of GIC providers, the county is in technical default on 4 of the 10 agreements. In each case, the county is negotiating with the investor (Bank of America) to remedy the technical default. In one case, the county has posted $6.7 million (valued at $7.7 million at August 1, 2011) in collateral to Rabo Bank to bring the transaction back into compliance. The county estimates that if it had to post collateral on the other four transactions currently in default, $11 million of additional collateral could be required. If, however, the county were required to fully collateralize the transactions, it could require up to $38.2 million.

BROAD-BASED ECONOMY WITH DOMESTIC AND INTERNATIONAL TOURIST IDENTITY

The county's sizable economic base is diversified by tourism, trade, banking, and manufacturing industries. Tourism remains a primary economic component and is bolstered by the county's airport and seaport operations as well as significant hotel/motel accommodations throughout the county, especially in Miami and Miami Beach. The leisure and hospitality sector accounts for over 10% of area non-agricultural employment. The number of tourists increased 12% to 12.6 million over the last 10 years through 2010, including a slight decline 1.6% in 2009. Tourists are also roughly split between domestic and international originations that feed from several markets. The economic impact of tourism has reportedly increased 22.9% over the past 10 years through 2009 (2010 not available) to $17.1 billion. International trade, about 8% of the county's gross domestic product, appears to be turning more favorable as its major trading partner, Brazil, has demonstrated resiliency in the global recession.

Locally, the Miami area has been markedly affected by the residential housing crisis, leading to significant foreclosure activity, initial unemployment filings and a dramatic falloff in construction activity. The number of foreclosures (REO) increased appreciably from 2008 to 2010 when it reached a new peak. Year-to-date in 2011 there have been 5,048 foreclosure filings which is still very high but lower than last years' peak. This is despite a recent notable uptick in housing purchases, largely from foreign investors. Median single family home values reportedly lost about half their value from their high point to about $183,900 in August 2010, while condominium values declined even more precipitously to $104,300 for the same period. The tax base, which had grown at a solid 14.1% annual average rate over the five years through fiscal 2009, has declined 24% in the last three years alone through fiscal 2012 (to $187 billion) as a result of the economic contraction and property tax reform. Unemployment, at 13.7% in May 2011 (seasonally unadjusted), is high in relation to both the state (10.5%) and the nation (8.7%) reflecting increased labor force growth far outpacing job growth. Unemployment rates will likely continue to increase in the absence of any material job creation. According to Moody's Economy.com (March 2011), Miami's (MIA) recovery will gather momentum throughout the year as increased tourism, commercial construction, and growth in consumer related industries more than offset bank closures and house price declines. However, MIA's recovery will lag compared with other large Florida metro areas that will enjoy stronger rebounds in in-migration. Long term, MIA will outperform the nation given its growing infrastructure, strong international trade ties, and stature as an international tourist destination.

What Could Make the Rating Go UP (Removal of Negative Outlook):

- Restoring of budgetary structural balance

- Significant improvement in financial flexibility and reserves

- Strong and sustained economic recovery and improved wealth indices

What Could Make the Rating go DOWN:

- Continued deterioration in financial condition

- Management's inability to adequately address financial challenges

- Continued economic decline

COUNTY STATISTICS:

Security: County's covenant to budget and appropriate from legally-available non-ad valorem revenues by amendment, if necessary (after obligations having a direct pledge on specific non-ad valorem funds and after costs related to essential governmental services).

Post-Sale Non-Ad Valorem Obligations Outstanding: $2.16 billion

Non-Ad Valorem Obligation Payout,

10 Years: 34.3%

20 Years: 67.6%

30 Years: 97.5%

39 Years: 100%

Debt Burden: 2.3%

County 2010 Estimated Population: 2,563,885

Countywide FY 2012 Full Value: $258.2 billion

Full Value Per Capita: $100,694

Countywide FY 2011 Operating Tax Rate as % Statutory Limit: 82.9%

FY 2010 General Fund Balances (as % of G.F. Revenues),

Total: 15.0%

Unreserved: 3.9%

County as % State/ U.S. (2000 census),

Median Family Income: 88.2%/ 80.4%

Per Capita Income: 85.8%/ 85.7%

Median Housing Value: 118% / 103.7%

Persons Below Poverty: 17.97%

County Unemployment Rate, 5/2011: 13.7% (10.5% state; 8.7% U.S.)

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology .

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

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Analysts

John Incorvaia
Analyst
Public Finance Group
Moody's Investors Service

Susan Kendall
Backup Analyst
Public Finance Group
Moody's Investors Service

Julie Beglin
Senior Credit Officer
Public Finance Group
Moody's Investors Service

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