Fitch Ratings and S&P have affirmed the City’s AAA bond rating, citing factors such as the strong local economy, strong financial policies and practices, very strong budgetary performance and flexibility, strong reserves, robust planning, and prudent cost management. The AAA rating is the highest rating achievable.
The AAA rating was assigned to 2019 general obligation bonds as part of the City’s process to refund or refinance just over $19 million in general, utility, and park bonds. By refinancing the outstanding debt, the City is expecting significant interest cost savings. The rating agencies also affirmed the AAA long-term rating on the City’s previously issued debt. Rating reports may be found here (Fitch) and here (S&P).
UPDATE – on May 7, the City received 12 bids to refinance $19 million in general, utility, and park bonds. The accepted low bid offered an interest rate of 1.8%, which will result in a $2.9 million debt payment reduction on the bonds with net present value savings of $2.1 million.
“We always evaluate the potential of refunding bonds once they become callable,” said Sharen Jackson, Chief Financial Officer. “With a savings of 11.1%, this refunding exceeded our refunding decision threshold of 5%. It’s a great opportunity to save taxpayer money by reducing the overall required debt interest repayment obligation.”
Refundings like this are part of the City’s overall strategy for reducing debt and associated costs. Since 2003, the City has reduced its property tax-supported debt by 60%. This has been accomplished by minimizing borrowing through the use of cash funding for capital projects, reducing amortization periods for bonds, and refinancing existing issuances for significant interest cost savings.
“Although there are times when borrowing is the appropriate approach for getting needed projects completed, Council has worked closely with staff to implement strategies to reduce the City’s overall debt,” said Jackson. “This refunding is yet another opportunity to minimize tax-supported financial obligations.”