City: Refinancing bonds receive strong ratings and positive outlook
The City of Cape Coral has been assigned ratings of Aa3 by Moody’s, A+ rating by Standard & Poor’s (S&P) and A+ by Fitch on the issuance of its approximately $48 million in bonds to refinance outstanding debt and purchase $4.9 million in capital vehicles and equipment. The City’s bonds issued in 2006 for land purchases will be refinanced to lower interest rates, which are expected to generate savings of $6 million over the life of the bonds. S&P also raised its outlook for the rating to Positive from Stable, due to the “implementation of new revenue sources in fiscal 2014 that contributed to markedly improved financial performance.”
The bonds are secured by the City’s covenant to budget and appropriate from legally available non-ad valorem revenues. Moody’s stated that the rating reflects the City’s “large residential tax base, which has begun to show signs of growth” and sound reserve levels, among other factors. According to Moody’s, the City’s unemployment rate in December 2014 is 4.8%, well below both the state and national level of 5.4%.
Fitch noted that the City’s taxable assessed value increased for the third consecutive year, with 8.5% growth in fiscal 2015. City officials report a significant amount of commercial and retail development and estimate a 30% increase in commercial building permits over 2014.
Moody’s expects the City to maintain a sound financial position given management’s conservative budgeting practices and multi-year budgeting. The City reported a sizable surplus in fiscal 2014 of $10.6 million, which was largely driven by higher than expected sales tax revenues and expenditure savings. S&P cited the City’s very strong budgetary flexibility and performance with conservative budgeting, with no plans to spend down reserves, and very strong adherence to financial management and formal reserve policies.
The fiscal 2015 budget includes a $4 million increase in reserves. Moody’s states that they “believe that the city will maintain current reserve levels due to conservative budget management, multi-year planning and a formal reserve target.”
The City’s combined annual required contribution for its three pension plans for general employee, firefighters and police is expected to decline due to several
reform measures instituted over the last several years, which are expected to save the city $186 million over the next 25 years. Moody’s noted that the pension reform measures “demonstrate management’s awareness and willingness to address forward looking challenges.”
Source: The city of Cape Coral