City of Southfield earns strong AA rating with $68M bond sale
The city of Southfield’s AA bond rating was reaffirmed on April 9 by Standard & Poor’s, one of the nation’s major bond rating agencies, placing the City among the top rated governmental agencies in Michigan. The new rating comes with the City’s $68 million Water and Sewer Capital Improvement Bonds sale on April 17 which will provide funding for citywide infrastructure repairs and improvements.
In preparing to sell the bonds, the City requested a Standard & Poor’s Rating Service evaluation of the City of Southfield’s credit quality. Standard & Poor’s reaffirmed the City’s strong underlying bond ratings of “AA.”
“Achieving this strong bond rating is extremely important to the City’s business reputation and benefits all taxpayers of the City,” commented Southfield City Council President Dr. Lloyd Crews. “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 financially, which includes holding-the-line and strictly adhering to our 2019-20 budget plan.”
The 'AA' rating reflects S&P’s assessment of the general creditworthiness of the city, including the following factors:
• Strong economy with access to a broad and diverse metropolitan statistical area (MSA);
• Strong management, with good financial policies and practices under our Financial Management Assessment (FMA) methodology;
• Strong budgetary performance, with an operating surplus in the general fund and break-even operating results at the total governmental fund level in fiscal 2018;
• Very strong budgetary flexibility, with an available fund balance in fiscal 2018 of 37 percent of operating expenditures;
• Very strong liquidity, with total government available cash at 24 percent of total governmental fund expenditures and 2.3x governmental debt service, and access to external liquidity which is considered strong; and
• Strong institutional framework score.
Moreover, S&P indicated that Southfield's economy remains strong as the city continues to rebound from the last recession, diversify, and exhibit tax base growth. The bond sale received significant interest with nine firms from across the U.S. bidding. The sale secured an impressive 2.88 percent interest rate, as compared to the 2.95 percent interest rate for the city’s most previous bond sale, resulting in an almost $3 million savings compared to the estimated interest costs in the preliminary prospectus.
“Having a strong credit score is an extremely important and impressive accomplishment for any municipality,” stated City Treasurer Irv Lowenberg. “This strong rating saves taxpayers’ money when the City needs to sell bonds to fund major capital projects like roads, bridges, and water/sewer system improvements. The Water and Sewer Bond funds are a critical match to our Street Bond funds, allowing the City to continue with our aggressive capital improvement projects throughout our neighborhoods. A strong credit rating also 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.”
In addition to city staff, the bond sale was facilitated by the financial advising firm, Public Financial Management, LLC, transfer agent Huntington National Bank and the law firm serving as bond counsel, Miller, Canfield, Paddock and Stone, P.L.C.
For further information, contact Southfield City Treasurer Irv Lowenberg’s office at (248) 796-5200.