Two of the nation’s leading bond rating agencies – Standard & Poor’s and Moody’s Investors Services – have released outstanding reports validating the City of Dayton’s fiscal management practices. S & P has upgraded its credit ratings for the City of Dayton, while Moody’s retained its existing rankings. Both actions are significant statements considering the severe economic challenges facing cities today.
To have one bond rating agency upgrade its ranking and another agency preserve our existing status is nothing short of amazing in today’s economic climate. These reports do not mean the City of Dayton is flush with money to spend, but they do mean that we are managing our limited resources in a very professional and prudent manner. They reflect the City of Dayton’s success in executing the sound financial control policies we have established.
S & P assigned an AA- to the City’s $80.1 million general obligation bonds, which is an upgrade from our previous A+ rating. Additionally, Moody’s assigned an A1 rating with a stable outlook.
Both S & P and Moody’s cited the City of Dayton’s fiscal management, stable cash reserve fund, and commitment to economic development as major reasons for their positive outlooks. Both agencies also credited the City of Dayton for its practical and realistic approach to managing its budget problems.
Standard and Poor’s and Moody’s Investors Service evaluate and assign credit ratings to public entities as well as corporations. The ratings are based on Dayton’s economy, demographics, management and finances. These ratings affect Dayton’s ability to issue bonds and they determine the interest rate the City must pay on its bond issues. The higher the rating, the lower the cost of borrowing, which saves taxpayer dollars. The upgrade could save the city nearly $200,000 per year in interest!
Dayton’s general obligation debt is used for community development purposes such as purchasing equipment and funding infrastructure, community and airport improvements, in addition to refinancing earlier bond issues. The funds cannot be used for operational purposes like paying salaries or day-to-day expenses.
The comments from the rating agencies explain their rationale for the upgrade:
Standard & Poor’s
S & P has upgraded Dayton’s General Obligation Bonds to AA- from A+. S & P also upgraded the City’s non-tax debt rating to A+ from a previous rating of A.
In justifying its upgrades, S & P noted Dayton’s strong financial management policies, diversifying economy and a low debt burden. It also cited activity occurring at Wright Patterson Air Force Base, the Dayton International Airport, Tech Town, CareSource and various neighborhood redevelopment projects as encouraging signs of the city’s momentum.
In its report, S & P’s said its decision to upgrade Dayton’s ratings was “reflecting the continuation of financial performance Standard and Poor’s Rating Services considers to be very strong and the ability to make budgetary adjustments in order to maintain the general fund balance at levels consistent with recent historic trends….The stable outlook reflects our expectation that the City’s strong management will continue to provide fiscal discipline by aligning expenses with revenues.”
Moody’s Investor Services
Moody’s Investor Services once again assigned an “A1” rating to the City of Dayton’s newest offering of General Obligation bonds and to the City’s outstanding General Obligation debt. The A1 rating on $80.1 million of City debt was assigned with a “stable outlook” and without any negative qualifications.
Moody’s also retained the “A2” rating on Dayton’s non-tax supported debt.
The ratings signal the national rating agency’s confidence in Dayton’s financial management practices and long-term stability and outlook.
In assigning the ratings, Moody’s cited Dayton’s efforts to reduce expenditures and maintain significant financial reserves even during a period of declining income tax revenues and high unemployment. Moody’s also credits Dayton’s relatively low debt burden, its pay-as-you-go basis for funding many capital improvements, and its relatively quick timetable for retiring outstanding debt.
“Despite short-term challenges posed by regional job losses,” Moody’s reported, “the city’s strict financial policies and practices will help keep financial reserves stable in the near term, and overall operations in line with revenue challenges.”
