New Issue: MOODY'S ASSIGNS A3 RATING AND STABLE OUTLOOK TO MIAMI'S (FL) SALE OF $72.

7 MILLION SPECIAL OBLIGATION NON-AD VALOREM REFUNDING REVENUE BONDS, SERIES 2011A Global Credit Research - 24 Jun 2011
OUTSTANDING NON-AD VALOREM REVENUE BONDS DOWNGRADED TO A3 FROM A2; G.O. ULT BONDS DOWNGRADED TO A2 FROM A1; OUTLOOKS REVISED TO STABLE FROM NEGATIVE

Municipality FL

Moody's Rating ISSUE

Special Obligation Non-Ad Valorem Revenue Refunding Bonds, Series 2011A Sale Amount $72,675,000 Expected Sale Date 07/14/11 Rating Description Special Obligation Non-Ad Valorem

RATING
A3

Opinion
NEW YORK, Jun 24, 2011 -- Moody's Investors Service has assigned an A3 rating and stable outlook to Miami's (FL) sale of $72.7 million Special Obligation Non-Ad Valorem Revenue Refunding Bonds, Series 2011A. Concurrently, Moody's has downgraded to A3 from A2 the rating on the city's outstanding $206.1 million rated non-ad valorem obligations (including $68.6 million in loans issued through the Sunshine State Governmental Financing Commission) backed by the city's covenant pledge; the outlook is revised to stable from negative. Moody's has also downgraded the city's $29.6 million General Obligation (ULT) bond rating to A2 from A1 and affirmed the A3 rating on the city's $226.7 million General Obligation Limited Tax bonds. In addition, the negative outlook on the ULT and LT tax ratings has been revised to stable from negative. The limited (and unlimited) tax bonds require a levy of about 0.883 mills in fiscal 2012 (based on preliminary taxable values) in relation to a maximum allowable levy of 1.218 mills. Although both ULT and LT bonds are required to remain within the 1.218 mill levy limit, if that limit is insufficient to pay the ULT bonds, the city can increase the millage, to any extent needed, to provide for ULT bond repayment. Bond proceeds will be used to refund $68.6 million in loans from the Sunshine State Governmental Financing Commission that are backed by a Dexia credit facility which expires in August 2011 and which is not being renewed. The refunding eliminates all of the city's variable rate debt exposure. Another non-ad valorem issue (Series 2011B), roughly in the amount of $55 million, is expected within the next few weeks to fix out a $50 million term loan for the city's share of the construction of a port tunnel. Legal protections include a cash funded debt service reserve and an anti-dilution test requiring that all non-ad valorem revenues cover maximum debt service on all non-self supporting obligations at least two times. The flow of funds requires only that pledged revenues be deposited into the sinking fund five days prior to debt service payments, which Moody's considers weak especially given the city's tenuous financial condition. The City Manager and Chief Financial Officer (CFO) have recently resigned, and the deputy City Manager has been appointed the new City Manager. Turnover in key city managerial positions at this time of fiscal instability is significant. SUMMARY RATING RATIONALE: The assigned ratings are based on the city's inability to achieve budgetary structural balance and the alarming drop in operating reserves, which has left the city in a vulnerable financial position, with severely limited operating flexibility and little expected improvement in the intermediate term. Finances continue to be challenged by above average budgetary fixed costs and a severely weakened housing market that has continued to reduce property taxes. The ability to achieve reserve targets related to the city's financial integrity ordinance within current policy timetable guidelines appears remote especially given recent high-level turnover in city management. The ratings also incorporate the city's weakened, but still sizable, tax base, broad-based and regionally-important economy with favorable long-term recovery prospects and a moderate debt profile. Ultimate long-term credit standing is dependent on the ability of officials to formulate a viable recovery plan that can re-establish structural balance and restore reserves to prescribed policy levels in an adverse economic environment that impedes revenue growth. STRENGTHS - Major trade and service center for the Southeast - Reduced, but still sizable, tax base CHALLENGES - Achieving structural balance and rebuilding reserves - Severity of housing market correction - Key city management turnover DETAILED CREDIT DISCUSSION

COVENANT PLEDGE PROVIDES ADEQUATE BONDHOLDER PROTECTION Although non-ad valorem funds provide the basis of support for the current offering, the city's continually-weakened financial position places strain on the typical operating sources used for repayment of non-ad valorem obligations. Available gross non-ad valorem revenue of approximately $257.9 million ($219.9 million net of essential general government and public safety costs not paid from property taxes) in fiscal 2010 appears significant in relation to the estimated $35 million in maximum annual debt service (MADS) on all non-ad valorem obligations (including the expected Series 2011B port tunnel bonds). However, since available revenues are also utilized for operating purposes, the city's deteriorating financial position lends little additional credit support to the bonds. Non-ad valorem funds are an important component of the city's operating budget, supplementing property tax revenues used for basic essential general government and public safety expenditures, and are expected to grow in importance given the depressed economic environment and property tax reform which will restrict property tax revenue growth going forward. Non-ad valorem revenues are diverse and include sales taxes, public service taxes, charges for services, licences and fees and other taxes. Net non-ad valorem revenues of $219.9 million in fiscal 2010 are down 20.5% from their fiscal 2006 peak of $276.6 million. About 35.5% of all covenant obligations (including the current 2011A and expected 2011B issues) are repaid within 10 years and all obligations are scheduled for repayment within 29 years. Debt service requirements gradually decline from the $35 million peak in fiscal 2017 to below $20 million in 2031 (through maturity in 2039). FISCAL OPERATIONS CHARACTERIZED BY CONTINUING STRUCTURAL IMBALANCE AND DETERIORATING RESERVES Despite the implementation of financial and debt principles, recent declines in revenues associated with property tax reform and a struggling economy as well as rising fixed costs have posed significant challenges to maintaining structural balance and adherence to financial policies. The ability to achieve structural balance and replenish reserves to required levels in the prescribed timeframe appears remote. The city has recorded operating deficits in five of the last six fiscal years through fiscal 2010 due to a combination of overspending, revenue underperformance and declines in property taxes related to property tax reform and the housing market correction. The use of reserves in fiscal 2010 continues the multi-year trend of depleting General Fund balance almost 90% from $126.3 million in fiscal 2006 to $13.4 million at the end of fiscal 2010, in contrast to the $93.5 million requirement (in fiscal 2011) pursuant to a city ordinance formula based on 20% of the average prior three year revenues. The fiscal 2010 total fund balance equates to a slim 2.7% of total General Fund revenues, with unreserved balance of $4 million equating to 0.8% of revenues. There is no undesignated balance, for the second consecutive year. Additionally, pension and health care costs total an appreciable $104.5 million, or 21% of the total $499 million fiscal 2011 operating budget, which inhibits financial flexibility. Finally, the city has increased contributions from the Parking Authority, which transfers excess funds to the city, to $7.5 million in fiscal 2010 from $2.0 million in fiscal 2009, only partly with the benefit of a parking fee increase. The City of Miami's $499 million fiscal 2011 adopted operating budget closed a $105 million gap primarily by implementing $72 million in salary and pension cuts, $15 million in fine and fee increases, a $10.4 million transfer from restricted Redevelopment Agency Funds, and budgeting for use of $23 million in reserves. Officials currently expect a roughly $5.5 million shortfall to be offset with funds that either have been budgeted or have already been set aside and they expect not to use any of the meager remaining reserves, although prior expectations as to the use of reserves were not met. For fiscal 2012, officials anticipate a $55 million gap and have thus far identified $35 million to $40 million of potential cuts including a 10% cut in city departments. Pursuant to Ordinance, when reserves are below prescribed levels, a two-year replenishment plan must be adopted. Non-compliance occurred at the end of fiscal 2009 (September 30) and presumably the cure period would require increasing the reserve from $13.4 million to $93.5 million by the end of fiscal 2011 (September 30), which appears highly unlikely. Officials, therefore, would likely have to consider options which could include lowering of the 20% requirement or extending the period in which it has to be replenished. Given the limited financial resources, even considering certain debt restructuring (see below) to achieve savings, reserve replenishment to such a degree is daunting. The city's original financial forecast at the beginning of fiscal 2011 indicated growing General Fund deficits from $122.5 million in fiscal 2012 to $174.5 million in fiscal 2015 based on spending patterns at that time and prior to declaring a "financial urgency" that reduced pension costs. More currently, the fiscal 2012 gap is estimated at $55 million with expected pension savings of about $50 million. City police and fire fighters have filed an unfair labor practice lawsuit against the city for invoking a financial urgency statute that allowed city officials to rewrite union contracts. Further, the city has been involved in whistleblower and other class action lawsuits. Also, the city's internal auditor has questioned local option gas revenue transfers to the General Fund for the fiscal years 2008 through 2010 and their use for operating purposes, for which the city is in disagreement ($4.5 million, $5.0 million and $2.2 million in fiscal 2008, 2009 and 2010, respectively). Finally, the city is also the focus of a Security and Exchange Commission (SEC) investigation into the city's financial disclosure in relation to certain bond issuance and transfer of certain funds. The ultimate outcome of all or any of these events and the potential impact on the city's financial condition is uncertain at this time. Actuaries have identified the city's other post employment benefit liability (OPEB) pursuant to GASB 45, at a substantial $521.9 million as of October 1, 2008, with the annual required contribution (ARC) at $43.8 million, in relation to the city's funding only the pay-as-you-go portion of about $12.9 million in fiscal 2010. The city has been contributing 100% of its ARC for pensions. General employee pensions are funded at 82.7% as of September 30, 2009 and police and fire are funded at 59.8%. Also, in recent years, double digit increases in health care costs prompted changes in the city's health care plan which have now been implemented. The city's ability to contain and reduce fixed costs and enhance revenues are important considerations in restoration of structural balance. ECONOMY STRONGLY AFFECTED BY HOUSING CRISIS; LONG-TERM OUTLOOK FAVORABLE The city has been strongly affected by the residential housing crisis, leading to significant foreclosure activity, significant fall-off in construction activity and persistent high unemployment. Foreclosed properties increased from 221 in 2007 to 917 in 2010, and are at 718 for the first five months of 2011. Foreclosures have increased residential vacant inventory, and housing values have declined precipitously. Median single family home values declined 50.2% from their 2007 highs of $380,100 to $189,400 in 2010, with continued declines to $169,200 seen as of April 2011, while condominium values declined about 54.6% to $116,900 over the 2006 to 2009 period, with continued decline to $115,700 seen as of April 2011. Unemployment is significant at 14.3% in April 2011 and high relative to both the state (10.4%) and nation (8.7%). The city's taxable base has declined 20% between fiscal 2008 and fiscal 2012 (preliminarily) to a still sizable $30.3 billion, with the greatest decline (15%) occurring in fiscal 2010, and a more modest 3.8% in fiscal 2012. The city is mature with population increasing only marginally (1%) over the past decade through the 2000 census, but about 10.2% since that time (to 399,457 estimated in 2010) with redevelopment and new construction having brought more residents into the city. A majority of city residents are foreign-born, and the 2000 census poverty level (28.5%) was more than twice that of the state (12.5%) and nation (12.4%). Unemployment, foreclosures and housing value declines will continue to weigh heavily on a poorer population base.

According to Moody's Economy.com (March 2011) the Miami (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. MANAGEABLE DEBT POSITION TO ACCOMMODATE EXPECTED DEBT ISSUANCE; REFUNDING ELIMINATES VARIABLE OBLIGATIONS Direct net debt burden is a moderate 1.3% as a percent of total valuation (1.9% overall debt burden). The city's general obligation debt (limited and unlimited tax) retires at an above average rate with rapid falloff in debt service requirements after 2022 through maturity in 2029, allowing for future financing flexibility. Non-ad valorem obligations pay out at a slower rate (35.5% within 10 years). The city has adopted a debt management policy which considers creditworthiness, security and payment of bond issues, covenants, and ongoing disclosure. The city's capital program approximates about $1 billion and is roughly half funded. Upcoming borrowing plans include two tax increment district financing of about $62 million later this year. In addition, officials are considering refunding a number of non-ad valorem bond issues to reduce principal payments over the next four years, and use most of the savings to help in replenishing the reserve. The city's variable rate debt, which has been represented by loans from the Sunshine State Financing Commission, is being eliminated with this refunding. The city's debt structure includes no derivative products. WHAT COULD MAKE THE RATING GO UP - Achieving structural balance while rebuilding cash and reserves - Significant economic recovery WHAT COULD MAKE THE RATING GO DOWN - Further deterioration of cash and reserves - Inability to contain or reduce fixed costs - Longer-term economic recovery STATISTICS: Security: The bonds are secured by the city's covenant to budget-and-appropriate legally-available non-ad valorem revenue (net of essential services, a non-defined term) FY 2010 Net Available Non-Ad Valorem Revenues: $219.9 million Total Non-Ad Valorem Obligations Outstanding (including current and expected offering): $337.6 million Estimated MADs on all Non-Ad Valorem Obligations: $35 million (2017) Payout (all non-ad valorem, including Series 2011A and expected 2011B offerings), 10 years: 35.5% 20 years: 77.1% 29 years: 100% Debt Burden: 1.9% General Obligation Bonds Outstanding, Unlimited Tax: $29.6 million Limited Tax: $226.1 million Population (2010 estimate): 399,457 Fiscal 2011 Full Value: $43.7 billion Full Value, per capita: $109,529 FY 2011 Operating Tax Rate: $7.674 (compared to $10 limit) Fiscal 2010 General Fund Balance: $13.4 million (2.7% of General Fund revenues) Fiscal 2010 Unreserved General Fund Balance: $4.0 million (0.8% of General Fund revenues) Fiscal 2010 Undesignated General Fund Balance: None City as % State (2000 census), Per Capita Income: 70.2% Median Family Income: 59.7%

Unemployment Rate (4/2011): 14.3% (10.4% FL and 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. REGULATORY DISCLOSURES Information sources used to prepare the credit 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 Investors Service considers the quality of information available on the credit satisfactory for the purposes of assigning a credit rating. Moody's adopts all necessary measures so that the information it uses in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history. The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information. Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

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 Jack Dorer Director Public Finance Group Moody's Investors Service

Contacts
Journalists: (212) 553-0376 Research Clients: (212) 553-1653 Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA

2011 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ARE MOODY'S INVESTORS SERVICE, INC.'S ("MIS") CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MIS DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MA NOT MEET ITS Y CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS DO NOT CONSTITUTE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS ARE NOT RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. CREDIT RATINGS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MIS ISSUES ITS CREDIT RATINGS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR

SALE.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit 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. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations Corporate Governance Director and Shareholder Affiliation Policy."

Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.

Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. (MJKK) are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, MIS in the foregoing statements shall be deemed to be replaced with MJKK. MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moodys Overseas Holdings Inc., a wholly-owned subsidiary of MCO.

This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.