New Orleans earns improved credit ratings
22nd October 2012 · 0 Comments
The City of New Orleans announced earlier this month that Standard & Poor’s Rating Services has assigned a credit rating of “A” and Moody’s a credit rating of “A3” to the City of New Orleans’ $200 million bond sale that took place last week. These ratings mean that the bonds will have favorable interest rates for the city, and also recognize that the city’s financial condition is improving.
“This is positive news for the city,” said Mayor Mitch Landrieu.
S&P credited the favorable ‘A’ rating to the city’s growing property tax base, the pledge of revenue to repay the bonds, and the additional security provided to investors by the creation of a debt service reserve fund.
Moody’s assigned an “A3” rating due also to the city’s growing tax base, the revenue coverage ratio of twice the revenue being pledged to the debt service, and the debt service reserve fund. Moody’s also noted the city’s recent actions to balance financial operations.
In addition, Fitch Ratings has confirmed the City’s Unlimited General Obligation rating of “A-” and assigned the Limited Tax General Obligation bonds a “BBB+,” one notch below the unlimited pledge. The confirmation recognizes the Landrieu Administration’s efforts to regain structural budgetary balance and an increase in tourism traffic, population gains, and major events scheduled for the next several years in New Orleans.
“These ratings are critical for the city,” said Deputy Mayor and Chief Administrative Officer Andy Kopplin. “We will be able to obtain lower interest rates on these financing transactions, which in turn will save residents money.”
Since taking office in 2010, the Landrieu administration has cut spending and raised recurring revenue to create a structurally balanced budget. The city has reigned in expenditures – decreasing spending by $40 million, by cutting contract costs from trash collection to Xerox copying, and by moving from high cost-contractors to building capacity in-house. In addition, the City has transitioned from one-time revenue “fixes” to a budget that relies on recurring revenues. It has improved revenue collection for sales and property taxes, and for parking and other fees.
“This will have a great bearing on our bond ratings, which will enable us to leverage our existing debt in a more fiscally responsible manner for the city,” said City Council Vice President and Budget Chair Jacquelyn Brechtel Clarkson.
The bonds were scheduled for a negotiated sale last week. The bond sale is expected to reduce the overall level of debt service related to the outstanding pension obligation bonds from the $19 million budgeted in 2012. The refinanced bonds will mature in 2030, the same year the original pension obligation bonds would have.
This article was originally published in the October 22, 2012 print edition of The Louisiana Weekly newspaper