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The economic times we are in seldom allows us to hear any good news about our financial condition. We constantly watch our personal savings and retirement accounts being negatively affected by the ups and downs of the stock market and the economy in general. We are always looking for the positive, for some small bit of good news about our fiscal condition.
In March of this year Moody’s Bond Rating Agency made a decision to review municipal credits nationally to recalibrate all ratings to a Global Rating Scale.
The purpose of the review was to better reflect a municipality’s credit worthiness compared to other debt including corporate and financial institutions. They have recently concluded this process and it turned out to be a positive development for the city of Athens’ General Fund and the city’s utility systems.
Standard and Poor’s Bond Rating Agency also made the decision to review and recalibrate to the same scale.
The city’s general obligation credit rating from Moody’s is now Aa2, up two categories from the previous rating of A1. Additionally, the city of Athens Water and Sewer Revenue Warrants is now A1, up two categories from A3. Electric Revenue Warrants is now Aa3, up two categories from A2, and Gas Revenue Warrants in now A1, up two categories from A3.
Standard and Poor’s presently rates the city of Athens AA- and this combined with Moody’s Aa2 reflects a similar distinction very few other cities have in Alabama. In Alabama there are 459 incorporated municipalities and it is noteworthy that approximately 3 percent only have obtained the highly coveted AA - / Aa2 ratings.
Moody’s Investor Service and Standard and Poor’s operate from a core of independence and objectivity with a goal of applying an investment rating based on a comparison of peers statewide and nationally.
Their general obligation bond ratings are forward-looking assessments of an entity’s relative credit strength, and reflects an analysis of four rating factors: economic condition and outlook, financial position and performance, debt profile, and management of the municipality. Ultimately the rating assignment reflects a weighting of these assessments. The general summary definition of a AA (S&P) and Aa (Moody’s) reflect “very strong capacity to meet financial obligations” and “ high investment grade.”
It pleases me very much that the city of Athens is within the 3 percent of Alabama cities that have obtained the highly coveted AA-/Aa2 ratings. The North Alabama region’s economy at the current time contributes to the economic condition and outlook because we have fared much better than many areas of our state. The city’s financial position and performance is good when compared to many like-size and larger cities in our state. The amount of debt for our city has been kept in reason compared with our city’s ability to pay long-term debt. I am also very pleased with the management of our city.
Our city’s management reflects well upon the mayor’s office, the City Council, our city department heads, and our loyal employees. I feel the city providing services to our citizens in a timely and cost-effective manner has helped us to receive these higher ratings from the two companies.
The value of a high investment grade rating and a rating enhancement is lower interest rates when the city borrows money for capital outlay project improvements. A lower interest rate applied to a long-term debt means a huge savings to a city as it repays the debt incurred for capital projects over the years. This ability of the city to borrow money at a lower rate of interest is also a better use of the taxpayer’s money because it frees money to be used on city projects rather than paying it out in interest.
These new ratings for our city should cause all of us to appreciate the work of our city personnel.
Opinion
Bond rating good news for Athens
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