CITY HALL — Three of the nation’s top credit rating agencies reviewed City Hall’s finances and have affirmed its triple-A credit rating.
Acting Finance Director Gigi Decavalles-Hughes said Monday that a combination of strong fiscal management, low debt levels and a diverse economy helped contribute to the triple-A rating, the highest credit rating assigned by Fitch Rating, Moody’s Investor Service and Standard & Poor.
The strong rating is expected to save taxpayers’ money when issuing bonds for capital improvement projects, such as a new road or sewer, Decavalles-Hughes said.
“When we go out to price the bonds we have more of the upper hand,” she said. “More people want our bonds and our underwriters are able to negotiate a better price for the city.”
A bond is essentially a loan an investor makes to the bond’s issuer. The investor, or bond buyer, generally receives regular interest payments on the loan until the bond matures or is “called,” at which point the issuer repays the investor the principal.
City Hall is expecting to save roughly $300,000 a year by refinancing bonds issued to build the Public Safety Facility, which houses the police and fire departments and the Santa Monica Jail.
“This puts us in an exclusive group of cities with a triple rating,” Decavalles-Hughes said. “This says a lot about how the city manages its money … . We’ve been very careful over the past several years in making cuts to the budget without cutting services and finding ways to get a jump on debts we do have.”
Decavalles-Hughes said City Hall was able to pay down some pension obligations early and recently renegotiated employee contracts to decrease City Hall’s health care and pension costs, both of which help reduce debt.
City Hall’s outstanding debt is currently $30.4 million or $339 per capita or about 1.3 percent of revenues, which she said is “very low.”
City Hall was required to seek out revised credit ratings as part of the debt financing plan for the reconstruction of Parking Structure 6 that was approved by the City Council Oct. 25. Those bonds are expected to be paid off in 20 years using a combination of general fund monies and revenue generated by parking.
City Hall’s total debt service is about $2.6 million a year for the next 20 years.
The bonds to be issued to pay for Parking Structure 6 received an AA+ rating. Fitch said this rating reflects “the city’s very strong financial position, projected balanced operations and strong financial management” and “prudent actions by management to pare expenditure growth” in addition to its “vibrant retail and hospitality sectors and high income levels, in spite of recent recessionary pressures.”