Florida Gov. Ron DeSantis signed a bill dissolving the Miami-Dade County Expressway Authority, despite analysts’ warnings that another wave of rating downgrades could result.
The warning was realized Friday, when Moody’s Investors Service downgraded to A3 from A2 the authority’s debt, saying that the action was taken in response to House Bill 385 being signed. Moody’s, which assigned a negative outlook to the rating post-downgrade, first cut its rating in May.
“In addition to materially changing the governance structure of the toll road system, the law dramatically reduces MDX’s ability to raise toll rates,” said analyst Myra Shankin. “Further, the political climate that gave rise to this legislation suggests a lack of willingness to raise rates, even if allowed under the authority’s powers.”
DeSantis, acting late Wednesday on the last bill sent to him by the Legislature, said he was pleased to approve the bill sponsored by Rep. Bryan Avila, R-Miami Springs and Sen. Manny Diaz Jr., R-Hialeah Gardens.
The law, which became effective when signed, creates the Greater Miami Expressway Authority, orders a new governing board to concentrate on reducing tolls, and imposes state oversight of new bond issuance.
“I appreciate the Miami-Dade legislative delegation’s commitment to providing toll relief to their constituents and ensuring that government agencies act in the best interest of the communities they serve,” DeSantis, a Republican, said in a statement.
HB 385 only applies to the five expressways owned by the authority, and not to the larger network of toll roads in Miami-Dade County owned by the Florida Turnpike Enterprise and the Florida Department of Transportation.
Less than two hours after the bill was signed, the Miami-Dade County Expressway Authority, also known as MDX, filed a motion requesting a preliminary injunction in an attempt to block the law from being enforced until an underlying lawsuit filed May 6 is adjudicated. The motion says the law violates the state constitution, which prohibits the Legislature from passing bills or special acts that only apply to Miami-Dade County, and it violates the prohibition on impairing the contractual trust indentures for its bonds.
Miami-Dade County Mayor Carlos Gimenez, who is also chairman of the MDX board, said he authorized filing for the injunction “to declare this attempted takeover unconstitutional.”
“Already, three bond-rating firms have downgraded MDX’s excellent rating based on state interference,” Gimenez said in a release. “That will lead to the need to increase tolls to pay higher interest rates on bonds if this new state board is installed.”
Gimenez said the MDX board had already reduced toll rates and declined to link future toll increases to changes in the Consumer Price Index like state road agencies do.
“This [law] does absolutely nothing to help Miami-Dade County residents who drive on MDX roads,” he said. “In fact, drivers on state-run roads…can expect ever-increasing tolls imposed by the state, which already controls 60% of the tolls in our county.”
In early May, rating agencies downgraded MDX’s $1.5 billion of bonds because of what they called the Legislature’s “unprecedented” political interference into the operations of an autonomous board.
S&P Global Ratings lowered its rating to A from A-plus and changed the outlook to negative; Fitch Ratings dropped its rating to A-minus from A and placed it on watch negative; and Moody’s Investors Service cut its rating while keeping it under review for the downgrade that materialized Friday.
Fitch analyst Scott Monroe said Friday that his agency won’t take further rating action at this point because of the pending lawsuit to determine the legality of the new expressway authority law.
Monroe said it was the “unprecedented degree of state interference” that led to Fitch’s downgrade May 8, and that if the new law remains in effect Fitch will wait to see what the new governing board does in implementing its financial policies and toll rates.
The Legislature’s dissolution of MDX and “onerous restrictions on future tolling ability sets a dangerous precedent,” said Sonny Holtzman, a Miami attorney who was chairman of the MDX for the first six years after its creation in 1995.
“My concern is this precipitous action by the state could happen anywhere,” he told The Bond Buyer. “It could have a ripple effect in the financing market and possibly impact the ability if any tolling agency to obtain decent financing.”
Municipal strategist Alan Schankel said in his daily column May 3 that the passage of HB 385 by lawmakers could impact other Florida issuers.
“Changing the underlying legal structure post-bond issuance casts a shadow over similar bond issuers in the state,” wrote Schankel, managing director for Janney Montgomery Scott LLC.
In addition to signing the bill late Wednesday, DeSantis made his three appointments to the new governing board of the Greater Miami Expressway Authority.
The governor appointed Koch Industries regional manager Fatima Perez, Key Biscayne attorney Marili Cancio, and Rodolfo Pages, who is a managing director for the private equity firm Caoba Capital Partners.
The law requires the Miami-Dade Transportation Planning Organization to appoint three members and the Miami-Dade County Commission to make two appointments by July 31. The ninth voting member of the board is the local district FDOT secretary.