Never been better – Wall Street awards the city its highest bond rating ever

April 10, 2009
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Mayor Ambrosino ‘Glimmer of hope’

Mayor Ambrosino ‘Glimmer of hope’

By Seth Daniel

seth@reverejournal.com

In the midst of financial chaos and money shortages, Revere received an ‘A’ from Wall Street.

For the first time in the city’s history, two Wall Street bond rating companies have rewarded the city with an ‘A’ bond rating. That rating comes just about eight years since the city’s bond rating was just barely above junk bond status and on par with many third world countries.

Now, the city’s rating is in the upper echelon of institutional bond issuers, allowing it to borrow and bond projects at a much more favorable rate.

Officially, Moody’s Investors Services moved the city up from a Baa1 rating to an A3 rating. Meanwhile, Standard & Poor’s assigned the city an A rating.

With that in place, the city was immediately able to sell $26.3 million in bonds, some $20 million of that for the new public safety facility, at a very low rate of interest.

“This is one glimmer of hope in a mostly dreary time,” said Mayor Tom Ambrosino. “We were very pleased and very happy with the upgrade. We’ve been advocating for this quite a while. We felt we deserved the upgrade last time around. We asked Standard & Poor’s to take a second, fresh look at us, and it ended up both organizations upgraded us.”

For city Director of Finance George Anzuoni, it was the best news he had heard in years.

“This is especially good news in these economic times,” he said. “To get a rating this high is amazing. I’ve been here 31 years and never had a rating this high. I’ve been waiting for this all these years.”

The mayor added the city’s finances are in good order, especially noting the $1.5 million Rainy Day Fund.

“If we weren’t facing a financial crisis, we would be in a very good financial position,” said the mayor. “Frankly, our finances are very good. The state funding, though, is a nightmare right now.”

The logical question, though, is whether or not the city can maintain that new, high rating. Within the next two years, officials estimated the city would most likely use all of the $1.5 million Rainy Day Fund. Likewise, it would probably also use up all the other reserves, and the Rental Car Surcharge for the police station funding – which Wall Street seems to love – is perilously close to being null and void.

“It’s certainly going to be a challenge in maintaining that rating,” said the mayor. “All of these bond rating agencies expect cities and towns to face difficult times and to dip into reserves. As long as we’re not significantly worse than anyone else, the rating should stay.”

Meanwhile, if the higher rating wasn’t enough for the city’s financial gurus, the sale of more than $26 million in bonds that had been held back since last October was certainly enough to celebrate conservatively.

Last fall, amidst the international financial meltdown, the city was holding $20 million in borrowings for the new police station, and another $6 million for the new fire equipment and the City Hall computerization plan.

With the markets in such disarray, a decision was quickly made to hold off on bonding those items. Then, as things got worse, it appeared as if the city may never be able to bond those items long-term.

That would have thrown a major monkey wrench in the financial plan.

Nevertheless, the city worked with Fidelity Investments and First Southwest to devise an innovative bond sale in which a bulk of the debt would be sold on the retail market, rather than institutionally.

The city ended up selling $21 million of the debt on the retail market in two days. The final $5 million was sold on the institutional market.

“We sold these in the midst of California surprisingly putting out two major bond offerings on the market, and then Newton came in the second day of our sale,” said Anzuoni. “We had a lot of competition there, and we got good rates…The way we sold them and when we sold them just made it go very well.”

Anzuoni said the city got a 30-year bonding (2039) at a rate of 4.8 percent – a much better rate than they anticipated. “I was surprised the rates were so good,” said the mayor. “They were better than we anticipated. I wasn’t surprised we sold them…We felt good about the sale.”

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