City of Southfield earns strong bond rating
(SOUTHFIELD, Mich.) – The city of Southfield’s AA+ bond rating was reaffirmed on July 20 by Standard & Poor’s, one of the nation’s major bond rating agencies, placing the City in the top three percent of all rated governmental agencies in Michigan.
Standard & Poor’s rating is reflective of the City's ability to show adherence to its five-year budget stabilization plan as well as the city's stable, steadily increasing, diversified local economy; above-average wealth and income levels; and moderate to low debt burden.
“Having a strong credit score is an impressive accomplishment in these tough economic times for Michigan cities,” commented Southfield City Council President Sylvia Jordan. “This saves the taxpayers money when the City needs to sell bonds to fund major capital projects like roads, bridges, and water/sewer system improvements. A strong credit rating results in lower interest costs and better terms for any bond issues. The AA+ rating is also a sign of financial stability with good management systems in place and a strong set of fiscal policies established by City Council. This is teamwork in action. All elected officials and the City’s management staff are united in their commitment to maintaining the financial integrity and strong financial position of the City. There is a long-range future vision at work here.”
The City’s financial position has been hampered in recent years by a steady decline in state shared revenues, the second largest single revenue component next to property taxes. The total projected in the fiscal year 2007-08 budget of $6,776,303 is $3,000,013, or 31 percent, less than the high-point total of $9,776,316 in fiscal year 2001-02. The City has been able to work toward returning to structural balance, however, by adopting and adhering to a five-year budget stabilization plan, attrition of some city positions, and new employee contracts.
City Treasurer Irv Lowenberg commented that the achievement of this excellent bond rating is primarily due to the City’s “Five Year Fund Balance Stabilization Plan” established in the 2004-05 fiscal year. “We are currently in the fourth year of the plan and are on target to its objective which is to wean the City off of the use of fund balance reserves for day-to-day operations,” continued Lowenberg. “Given the challenges of the current Michigan economy, achieving a AA+ bond rating is a major accomplishment.”
The City’s commitment to stay on course with the five-year plan is reflected in the fiscal year 2007-08 general fund budget increase of $995,951, or just 1.5 percent. The July 2007 Municipal Cost Index (MCI), the Consumer Price Index (CPI) for city operations developed by the American City and County trade publication for municipalities, indicates an increase of 3.6 percent nationally.
“This strong rating is extremely important to the City’s business reputation and benefits all taxpayers of the City,” stated Joan Seymour, chair of the Council Finance Committee. “Major capital projects are necessary to keep the City first class and bond issues are necessary to fund such projects. A strong bond rating for the City, much like a strong credit score to an individual, enables us to save money by getting lower interest rates on the bonds. The AA+ bond rating confirms Southfield’s ability to effectively manage financial resources, making it an attractive destination for new business development, redevelopment and future fiscal growth. It is critical that we stay on course to the five-year plan, which includes holding-the-line and strictly adhering to our 2007-08 budget plan.”
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