ATLANTA -- Plans by Broward County, Fla., to defease $168.3 million of outstanding Port Everglades Authority debt have taken a big step forward with the choice of a financial adviser for the transaction, the county's finance director said last Thursday.
The official, Phillip C. Allen, said he expects the county to wrap up a contract with Clayton Brown & Associates tomorrow, following approval of the Chicago-based dealer by the county's board of commissioners on June 28.
With the financial adviser in place, Allen said, an underwriting team can now be chosen by mid-August, with issuance possible in the fall. A short list of finalists for senior manager will be determined Aug. 9, with a winner designated by Aug. 17, he said.
Under the terms of a referendum approved by voters in March 1992, Broward County plans to take over the 67-year-old authority on Nov. 22. Under the takeover, the port's sevenmember commission will be abolished, but the port will continue to have its own director and staff, who will report to the county administrator. The authority manages a 900-acre site that is the world's second-largest berth for passenger cruise liners.
In conjunction with the takeover, the county expects to issue revenue acquisition bonds to fund an escrow that will defease the authority's two unrefunded bond issues. The issues are: $117.5 million of series 1989A port facilities refunding revenue bonds and $50.8 million of series 1989B port facilities senior revenue bonds.
Under current market conditions, Allen said, as much as $180 million of acquisition debt might be needed to defease the port authority's debt. The financing could achieve present value savings of up to $20 million, he said.
Like the debt being defeased, the acquisition bonds would be secured by the port's operating revenues and would not have a separate pledge from the county.
But before the issue can be sold, Allen said, the county will seek a private-letter ruling from the Internal Revenue Service confirming its tax-exempt status.
The ruling is needed to clarify a possible ambiguity in the date of the acquisition of the authority by Broward County, allen said. Under IRS regulations, in order for such debt to be exempt, it must be sold within six months of the date of the acquisition. The county will seek assurance that the IRS construes the acquisition as occurring in November 1994, rather than at the time of the referendum in March 1992.
Kenneth M. Myers, a partner at the Miami office of Squire, Sanders & Dempsey, the county's bond attorney, said that the request for the ruling had not yet been filed, but would be soon.
Allen said that the Securities and Exchange Commission's recent launching of a probe into the choice of Clayton Brown as an underwriter for an 1992 bond issue sold by Margate, a city in Broward County, has not caused him concern.
"If we were worried about firms from which the SEC has requested information, we would have to exclude nearly everybody," Allen said. "But of course we will follow the investigation, and will review the situation if need be."
On June 6, the SEC asked the city manager of Margate to provide documents concerning the choice of Clayton Brown as underwriter and the firm's use of consultants in landing the $18.9 million refinancing. The request also asked for information about communications since 1988 with two prominent state legislators: Florida's House Speaker Bo Johnson, D-Milton, and Rep. Michael Abrams, D-North Miami Beach.
Broward County's decision in 1992 to acquire Port Everglades Authority followed a period of intense controversy for the port, which was set up by the state legislature in 1927.
In 1989, Florida's legislature decided to conduct a wide-ranging investigation after the authority came under fire for alleged extravagant spending. The inquiry also focused on fees charged in the two 1989 bond issues, which were underwritten by Bear, Stearns & Co.
In July 1990, Florida's auditor issued a report criticizing the authority for failure to document expenses.
Earlier that year, a federal grand jury was convened to conduct a wideranging probe of corruption at the authority. The investigation initially focused on bond issues, spending, and allegations of cronyism at the authority, but now is also scrutinizing other county agencies.
The grand jury probe resulted in three indictments: bond lawyer E. Louis Fields in 1991, and commissioners Walter Browne and Joseph DeLillo in 1992.
Fields was convicted early last year on three counts of tax fraud. He has also agreed to plead guilty to a racketeering charge and cooperate with federal prosecutors.
Mail fraud and tax charges against Brown were dismissed last year. DeLillo's trial on three counts of tax fraud is pending.