ATLANTA - Homestead, Fla., the city most heavily damaged last week by Hurricane Andrew, is planning to sell $10 million of short-term tax-exempt securities to fund operating expenses, its finance director said yesterday.
"This will let us handle any cash-flow problems that occur with payroll or other operating expenses," said Finance Director Horatio Montes de Occa.
Describing the borrowing as "grant anticipation notes," Mr. de Occa said it will be repaid by federal disaster relief aid that the city expects to begin receiving in about 45 days.
President Bush said Tuesday that the federal government would cover 100% of funding for debris removal, temporary housing, and repairs to uninsured hurricane-damaged public facilities.
The city does not yet have a firm estimate of storm damage, Mr. de Occa said, but expects to complete its assessment in the next several days.
The finance director also said Homestead may opt to issue additional bonds as part of its effort to rebuild.
Richard Montalbano, a senior vice president at Kidder, Peabody & Co., which will underwrite the financing, said the city hopes to close the issue by the end of September. Mr. Montalbano said it will be backed by a letter of credit through a Florida bank and will likely be structured as tax-exempt commercial paper with a final maturity of between 12 and 24 months.
He said Homestead officials hope to complete documentation for the issue and receive city council approval within a week.
Despite suffering extensive damage from Hurricane Andrew's 140 mile per hour winds 10 days ago, the south Florida city of 25,000 is "back in business," providing police, water and sewer, and limited electric services, Mr. de Occa said.
He said Homestead's city hall suffered extensive water damage and several city maintenance buildings were destroyed. A portion of the city's power plant was knocked out and electric transmission lines were heavily damaged, he added.
In addition, a city-owned baseball stadium completed in July 1991 to house the Cleveland Indians during spring training suffered extensive damage to its roof, sky boxes, and field areas, Mr. de Occa said.
However, Homestead's water and sewer system was relatively untouched by the storm, he said.
Homestead expects to end its 1992 fiscal year on Sept. 30 with a general fund surplus of about $1 million, which has so far been left untouched, Mr. de Occa added. He said the city has an all-funds budget of about $22 million, including a $12 million general fund.
Property tax bills, which are due between Nov. 1 and April 1, are being sent out, and the city does not currently have plans to change that schedule, the financial director said.
Gov. Lawton Chiles of Florida has granted a 60-day extension for adopting 1993 fiscal year budgets to municipal governments affected by the hurricane.
Mr. de Occa said debt service payments on outstanding city bonds are not in jeopardy. Only one issue, a $1.8 million excise-tax revenue bond deal sold in October 1991, faces a coupon payment in the near future, he said, and the issue has funds available to cover the payment. The deal is insured by Municipal Bond Investors Assurance Corp.
The city also has $3.9 million of utility bonds insured by Financial Guaranty Insurance Co. and $1.1 million of guaranteed entitlement bonds backed by AMBAC Indemnity Corp.
At Moody's Investors Service, John Incorvaia, a vice president, said officials at the rating agency have been in contact with local governments in south Florida, including Homestead, and have been reassured that current debt service payments are being made.
"Moody's will monitor storm damage assessments as they become available," Mr. Incorvaia said. "We do not plan any immediate ratings action."
In addition to pledging 100% damage reimbursement, President Bush also has pledged to rebuild the devastated Homestead Air Force Base. It employs 4,000 civilians and 4,400 military personnel, and adds more than $400 million a year to the local economy, according to the Pentagon.
"That was very good news for the city." said Mr. de Occa.
Private insurers now estimate that damage claims in southern Florida total $7.3 billion, according to the American Insurance Services Group.