Bonds

An ongoing legal battle over Florida’s attempts to take over the Miami-Dade Expressway Authority isn’t showing signs of abatement.

Four years after Gov. Ron DeSantis signed off on a bill that sought to dissolve the toll road authority, known as MDX, and replace it with the state-managed Greater Miami Expressway Agency, or GMX, both parties to the dispute are pursuing new legal avenues.

A continuing legal showdown is a “battle between two governments” over the defining principles of home rule law in the state, said MDX’s attorney, Eugene E. Stearns, from Miami-based Stearns Weaver Miller Weissler Alhadeff & Sitterson law office.

The Miami-Dade County Expressway Authority operates a 33.6-mile toll road system that includes the Dolphin Expressway, shown here.

Bloomberg News

MDX was founded by the state legislature in 1994 and is a county-controlled toll board overseeing some of the state’s busiest commuting routes.

Given that Miami-Dade has the state’s largest population and some of its most extensive infrastructure, it also enjoys the broadest home rule powers in the state, Stearns said, adding that it is empowered by Florida’s constitution to not only create agencies but also abolish state agencies created by the legislature that only do business in the county.

“There are several other home rule counties, but none enjoy the absolute total power that is vested by the Constitution in this county, and that’s what this is about,” he said.

Political discontent over toll road rates helped drive a legal saga that erupted in 2019 following the passage of a bill by Florida’s legislature that ordered MDX’s takeover and the creation of a new agency with marching orders to reduce tolls and place a cap on future rates.

The move met immediate legal resistance from MDX, which sued in county court to have the bill struck down, arguing it violated Florida’s home rule charter, a constitutional revision adopted in 1973 that gives municipal governments wide decision-making latitude in local affairs with less state oversight.

Leon County Circuit Judge John Cooper in August 2019 issued a ruling in favor of MDX’s arguments, agreeing the bill and the state takeover attempt violated Florida’s constitution, which protects Miami-Dade County’s home rule authority and prevents the state from passing a law that pertains only to that county.

The state failed it its initial appeal attempts, and the case is now up for final judgment in Florida’s Third District Court of Appeal.

However, takeover proponents in the state House are pursuing other avenues.

Florida’s Republican-controlled House and Senate in April passed a bill similar to the 2019 legislation, this time however attempting a takeover of MDX by expanding the toll authority’s borders to include a small portion of an adjacent county, making it a bi-county agency and thereby removing from home rule protections.

The bill was rolled into a larger transportation package. Its sponsors couldn’t be reached for comment.

In response to that bill, the Miami-Dade Board of County Commissioners passed a memorandum Tuesday invoking home rule protections to dissolve GMX and protect MDX.

Stearns said MDX is continuing its appeals of the new bill after its initial failure in court last month.

“It’s going be tied up in the courts now for a while now,” he said. “If they want to fight about it, we’ll keep fighting about it.”

Robert Poole, director of transportation policy at the Reason Foundation, said in a recent newsletter that Florida’s “second takeover attempt” of MDX could succeed based on the ruling of that appeals court in favor of the state.

“Although another appeal is being considered, the chairman of the MDX board sent an email to employees and managers telling them they would start taking orders from the recently appointed board of the state-created Greater Miami Expressway Authority,” Poole said.

Poole added that nearly every year, state lawmakers passed some form of anti-toll legislation and that if MDX was successful in fending off the state’s latest attempts at a takeover, it could still face intense political pressure going forward.

After downgrading MDX, Fitch Ratings in its most recent action published in September 2020 affirmed the authority’s $1.3 billion of outstanding senior revenue bonds at BBB-plus while revising the outlook rating to stable from negative.

Scott Monroe, senior director at Fitch, told The Bond Buyer MDX’s real financial metrics are indicative of a higher rating, but the rating agency took into account “all the risks of a prolonged legal battle” in its decision.

“It was our expectation that this would stretch on for years,” he said.

While ongoing legal woes have prevented MDX from being able to perform several vital functions, including issue debt to fund capital improvements, Fitch cited the authority’s ability for effective financial and operations management despite ongoing litigation

“They’ve only been able to proceed with things like expanding the system or maintaining it by using cash flow that’s generated from the system, as opposed to issuing debt to maintain their assets,” Monroe said. “Ultimately, it’s also resulted in certain political issues, spurred by, by higher rates and the political discontent that that that’s resulted because of that.”

S&P Global Ratings in June affirmed its A rating on MDX’s toll revenue bonds while revising the outlook to stable from negative.

“The outlook revision reflects our expectation MDX can maintain financial metrics consistent with a strong financial risk profile,” said S&P Global Ratings credit analyst Joe Pezzimenti in the rating report.

Moody’s Investors Service in November affirmed MDX’s A3 bond rating while revising the outlook to stable from negative.

Fitch’s Monroe said if the state was successful in the takeover, all assets and debt would transfer from MDX to GDX, and the largest change would likely be the creation of a new board; according to the legislation, three of GMX’s board members would be appointed by the governor, three by the Miami-Dade Transportation Planning Organization, two by the Miami-Dade County Commission, with the final voting member of the board the local Florida DOT district secretary.

With a state-level impetus to control toll rates, how they rule on a host of decisions might have a big impact on the future path of the credit rating, Monroe said, with potential credit negatives emerging if analysts see excessive debt financing or the reduction of tolls without a corresponding offsetting action.

“Alternatively, the board could act in a very fiscally prudent manner,” he added. “The problem is we have no history.”

Regardless of who is in charge in the end, the legal certainty of a final decision on ownership would be a major positive as it is it opens certain legal doors and allows the performance of certain functions like debt issuances are impossible or difficult to achieve right now, Monroe said.

“We can be more confident that they have the funding in place to maintain the asset in the state of good repair so that that will be a positive regardless of which direction it goes in,” he said.

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