Astonishing city officials who only sought to maintain Bristol's existing bond rating, Standard & Poors today awarded the city an upgrade its credit rating that puts it only one step behind the best-rated municipalities in the country.
"We're happy campers," said Mayor Art Ward, who pumped his fist in the air in joy at the unexpected news.
City Comptroller Glenn Klocko called it "freaking phenomenal," saying it would save taxpayers $100,000 in next week's bond sales alone.
City Finance Chairman Rich Miecznikowski said the higher rating will be "a big plus for us" in future bond sales as well.
The other two rating agencies, Moody's and Fitch, left the city's rating as it has been. But Fitch's report indicated it might upgrade Bristol in the months ahead as the firm revises its way of dealing with municipal bond ratings generally. Moody's is also eyeing changes that could push Bristol's rating higher.
Bristol's rating is significantly higher than the cty's demographics would normally indicate because it has managed to take care of its money so much better than most towns.
It has a large rainy day fund, overfunded pension plans and policies over the long run that have proven its commitment to a fiscal conservatism that bond buyers appreciate.
I'll have more on this later today.
Update: Here is Fitch's report today on Bristol's finances:
NEW YORK - (Business Wire) Fitch Ratings has assigned an 'AA' rating to the city of Bristol, Connecticut's $8.9 million of tax-exempt general obligation (GO) bonds, issue of 2009, and an 'F1+' rating to the city's $7.4 million of taxable GO bond anticipation notes (BANs). The bonds and BANs, scheduled to sell competitively on Feb. 4, will finance various general purpose and school projects in the city. Fitch also affirms the 'AA' rating on the city's approximately $51.8 million of outstanding GO bonds. The Rating Outlook on the GO bonds is Stable.
The 'AA' rating is based on Bristol's sound financial flexibility, well-managed overall fixed-cost burden, and slightly below-average economic indicators. Strong financial management, including prudent budgetary practices, has contributed to consistently healthy reserve levels, which provide ample operating flexibility particularly in the current recessionary environment. Pensions are significantly overfunded and future capital needs appear manageable. A key rating driver is the city's ability to maintain its financial flexibility during the current recession, while also continuing to diversify the local economy. The short-term 'F1+' rating reflects the city's general credit characteristics.
Bristol is located in Hartford County approximately 16 miles west of the state capitol. The Entertainment and Sports Programming Network (ESPN) has its headquarters in the city, accounting for 11% of the residential employment base and 5.3% of fiscal 2009 taxable assessed valuation. The company's approximately $1 billion of infrastructure investments this decade and longstanding presence in the city somewhat offset Fitch's concerns about the single-employer economic concentration. Bristol's 229 Technology Park is fully occupied and the Southeast Bristol Industrial Park, which can accommodate up to 750,000 square feet of industrial space, was recently completed. The Southeast Bristol Industrial Park and successful redevelopment of the 17-acre downtown mall area should help broaden the local economy and improve labor market conditions over the next several years. The city's November 2008 unemployment rate grew to 7% from 5% the prior year, and remained above the county, state, and national levels. Population growth has been modest this decade and per capita income levels are below the high state average but slightly above the national level.
Bristol's conservative financial management has resulted in consistently healthy reserve levels. Fiscal 2008 ended with a $1.3 million surplus, which brought the unreserved general fund balance to $27.2 million, or a sound 13.2% of spending. Reflecting the city's prudent budgeting practices, economically sensitive investment income, building permit fees, and conveyance taxes ended the year near or above budgeted amounts. Officials expect to end fiscal 2009 with another modest general fund surplus after realizing a large 51.8% increase in the tax base stemming from the Oct. 1, 2007 revaluation and minimizing expenditures during the fiscal year; the revaluation, effective for fiscal 2009, underscores the health of the local tax base. Officials expect minimal to no growth in the fiscal 2010 operating budget, reflecting tightening budgetary conditions stemming from the national recession.
Overall debt is low at $1,090 per capita, or 1% of taxable market value, and debt amortizes at the rapid rate of 69.4% within 10 years. Bristol's fiscal 2008 debt service burden represented a low 3.4% of general and debt service fund spending, which provides the city with sufficient flexibility to issue up to $28 million in bonds for two new school projects within the next five years. Pensions remain considerably overfunded despite significant investment losses in calendar 2008, and the city is developing plans to manage its $72 million other post-employment benefits (OPEB) liability. An OPEB trust fund was created in the current fiscal year.
Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter of 2009.
Fitch Ratings, New York
Ryan A. Greene, +1-212-908-0315
Jessalynn K. Moro, +1-212-908-0568
Cindy Stoller, +1-212-908-0526
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