Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Municipal Finance topic
No spam. Unsubscribe anytime.
New financial advisers tell Hampton council city's AA rating likely to be affirmed
Summary
Public Financial Management (PFM) told Hampton City Council that the city's AA general-obligation credit rating is sound and that continued strong financial management should position the city well in upcoming rating-agency meetings for March 2010 bond issues.
City of Hampton officials on Tuesday heard a briefing from newly hired financial advisers Public Financial Management Inc. (PFM) ahead of meetings with the three major bond-rating agencies.
"Hampton needs to remain as diligent and as committed as it has over time to managing its its financial affairs," said Joanne Carter, PFM's managing director for Virginia, who led the presentation. Carter told council that Moody's, S&P and Fitch are reworking methodologies after the financial crisis and that Moody's in spring 2009 assigned a negative outlook to the U.S. local-government sector as a whole.
Carter said the rating agencies are watching revenue trends closely'especially declining real-estate values and sales-tax receipts'and will continue to monitor reserves, debt burden and how localities respond. She showed PFM's five-year peer benchmarking and reported that, on PFM's metrics, Hampton's general-fund reserves and financial margins outperform the peer group.
PFM also quantified the dollar impact of relatively small rating differences. "If you borrowed $10,000,000 over 20 years, that 19 basis points would cost you $380,000," Carter said, illustrating how a one-notch move on a long-term bond can change debt-service costs materially.
Mayor Ward and council members asked questions about how community development authorities (CDAs) and other off-balance-sheet arrangements factor into agency analyses; Carter said rating analysts focus on tax-supported (general-obligation) debt and consider but do not automatically penalize a locality for troubled CDAs.
PFM was chosen after the city's procurement process, city staff said, in part because the firm couples debt-advisory services with budget and strategic-consulting expertise. Council requested follow-up materials PFM said it had prepared, including the peer-comparison work and maps of local debt exposures. The advisers will meet with the rating agencies later this week and next to discuss Hampton's March 2010 bond plan.
