WKXL – September 20, 2013
City of Concord – General Obligation Bond Rating
Recently Standard & Poor’s Rating Service raised its long-term and underlying rating of the City of Concord’s general obligation (GO) bonds to ‘AA+’ from ‘AA’, with a stable outlook.
The upgrade follows a “trend of robust operating results, reflecting conservative budget practices and strong proactive financial management.” At the time of the rating, the City projected an operating surplus in Fiscal Year 2013 increasing available reserves to very strong levels. The most recent 2013 fiscal year-end preliminary report to the City Council in September projected the preliminary operating surplus to be approximately $900,000.
Standard & Poor’s considered the City’s five years of operating surpluses particularly noteworthy given all of the state aid revenue cuts over the last several years. They cited City management’s willingness “to take appropriate budgetary measures” to offset these impacts as an important factor in its new rating.
Another important factor cited is that the City’s FY 2014 budget is structurally balanced. The policies and procedures used by the City as it oversees day-to-day operations were cited as “strong, and well embedded and likely sustainable”.
Why this is important to the community is that bonds are rated for the default risk they present based on the financial condition of the bond issuer. Therefore, the better the City’s bond rating, the less the assumed default risk. A lower default risk results in a lower interest rate the City is charged when it sells bonds for infrastructure projects and large equipment purchases. This ultimately translates into fewer dollars needed for interest payments over a multi-year period, usually ten (10) to twenty (20) years.
The actions taken to achieve this new improved rating are the culmination of conservative fiscal actions taken by the City over the last few years. The timing of the rating increase is important as the community moves forward with major infrastructure improvements, namely the Sewalls Falls Bridge replacement, the reconstruction of Route 3 North and the Complete Streets Project in Downtown Concord.
