Miami Wins Rating Upgrade as Zika Threat Hangs Over Economyby
S&P lifts general-obligation rating to fourth-highest level
CDC has issued first U.S. travel advisory for parts of Miami
Miami won a credit upgrade from S&P Global Ratings even as the south Florida city reels from the spread of the Zika virus that looms over the tourism industry.
As of Friday, there are 16 cases of mosquito-transmitted Zika virus reported in the mainland U.S., with most cases traced to a square-mile area north of downtown Miami. The Centers for Disease Control and Prevention issued its first U.S. travel warning this week advising pregnant women to avoid the Wynwood area, the Miami neighborhood where the virus is being spread by mosquitos. While most Zika cases are mild, infected pregnant women are at risk of giving birth to babies with microcephaly, a birth defect that curbs brain growth.
S&P raised Miami’s general-obligation rating by one step to AA-, the fourth-highest investment grade rank on Friday, citing the city’s economic recovery. The New York-based rater noted Miami’s "ideal” location for international trade and regional focus on trade and tourism. Around 15.5 million visitors stayed overnight in the city last year, according to the Greater Miami Convention and Visitors Bureau.
Surging Zika cases in Puerto Rico could hurt the island’s tourism and are a credit negative, Moody’s Investors Service said in a report on Thursday. The number of residents of the commonwealth who have acquired the infection locally has climbed since April to 4,667 reported cases as of July 27, according to the CDC.
But right now Zika doesn’t appear to be a credit risk to Miami, said Tom Schuette, co-head of investment research and strategy at Solana Beach, California-based Gurtin Municipal Bond Management, which doesn’t hold Miami debt among its $10.6 billion of municipal assets.
"From a credit standpoint, you want to take a very wait-and-see-approach before making any judgments on whether it’s going to have a detrimental impact,” Schuette said. “This is something you need to see play out for quite a while.”