Archive for Friday, March 26, 2010

De Soto gets an A+ in financing

March 26, 2010

When it comes to public finances, Standard and Poor’s give De Soto an A+.

The financial ratings firm has moved the city’s credit rating one notch from A to A+.

Pat Guilfoyle, city administrator, said he was surprised about the upgrade.

“In a normal world that’s big news, but when you put it in terms of the current economic environment, it’s extraordinary news," he said.

A March 16 report from the financial firm announced the upgrade to the city’s credit rating.

This upgrade followed a recent upgrade in 2008 when the city’s credit rating jumped three notches from BBB, which according to Standard and Poor’s means the city has “adequate capacity to meet financial commitments, but more subject to adverse economic conditions,” to A, which the company states the city has a, “strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.”

The Standard and Poor’s Web site states the company uses plus and minus ratings to “to show relative standing within the major rating categories.” An AAA is the highest rating that can be achieved.

Standard and Poor’s listed several reason why the city had its rating upgraded including the city’s budget, which has seen a surplus in its cash balance over the years.

The report stated that six years of surpluses has put the city’s general fund balance in the black by $773,000 at the end of fiscal year 2008 and $817,000 by the end of fiscal year 2009.

Guilfoyle attributes this to the city’s approach of budgeting not just for the next year, but forecasting future budgetary needs.

“This community gets real,” he said. “We don’t live in a rosy world. We take a look at the realities and we try to respond to those realities.”

Because of that planning, the city has been able to grow its cash reserves in this tough economy.

“They were very impressed by that,” Guilfoyle said.

The report concluded that “officials should continue to budget conservatively as they manage through the current economic environment to preserve the city’s sound financial position. Standard & Poor’s also expects the city to continue to adhere to its stated financial policies and maintain its current electric utility investment fund balance, which provides additional flexibility when combined with existing reserves. In addition, we expect the city will not significantly add to its already moderately high overall debt burden."

The upgraded credit rating could lead to better interest ratings when the city applies for bonds.


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