City Earns AAA Bond Rating from S&P
City of Fort Lauderdale Bonds Upgraded to 'AAA' by S&P
Moody’s issues bond upgrade and positive outlook
Fort Lauderdale, January 14, 2020 – The City of Fort Lauderdale today received significant recognition of its ongoing plans to address aging infrastructure and ensure that its general operations are no longer dependent on annual raids of utility reserves.
Both major Wall Street credit rating agencies gave high marks for the City of Fort Lauderdale’s budgetary performance and healthy growth. Standard & Poor’s boosted the City’s rating from AA+ to AAA. Moody’s upgraded its outlook on general obligation bonds from stable to positive.
In meetings with the rating agencies, the City’s finance and public works staffs laid out the plans to upgrade water, sewer and stormwater systems and responded to rating analysts’ questions on work schedule. They also explained that the City Commission and city manager are weaning the general operations off of the use of utility revenue. Some analysts had been concerned about the use of utility dollars because the general fund would be out of balance except for the crutch. Discussions with the agencies occurred both before and after the series of December sewer pipe breaks.
“The rating upgrade is tremendous news for the City and its residents,” Mayor Dean Trantalis said. “We proved to Wall Street that we are aggressively moving ahead with critical infrastructure plans and that we will use utility revenues for utility needs rather than as a budget-balancing tactic. Fort Lauderdale’s strong ratings will save residents and businesses millions of dollars in interest costs and strengthen our long-term financial stability.”
The ratings and opinions of Wall Street’s leading credit rating institutions signaled strong confidence in the financial management of the City of Fort Lauderdale. Highlights of the reports are summarized below. The full reports may be viewed at: S&P Global Ratings Report and Moody's Investors Service Report
Standard & Poor’s Global Ratings:
S&P Global Ratings raised its rating on the City of Fort Lauderdale's general obligation (GO) bonds and series 2012 special obligation bonds to 'AAA' from 'AA+'. At the same time, S&P Global Ratings assigned its 'AAA' long-term rating to the city's series 2020A GO (Parks and Recreation) bonds and 2020B GO (police and public safety projects) bonds. The outlook is stable.
"The upgrade reflects our view of the city's property and income wealth improvement coupled with an improved debt profile," said S&P Global Ratings credit analyst Jennifer Garza. “The city's strong budgetary performance and reserve levels have remained resilient despite added hurricane recovery expenses from Hurricane Irma and added infrastructure spending for sea wall elevation improvements.”
In its report, the agency cited “the city's strong budgetary performance, very strong financial position, and very strong management practices and policies in place also support the 'AAA' rating.”
Fort Lauderdale has improved its overall net debt burden and improved funding status for its pension and other postemployment benefits (OPEB).
The series 2020A bond proceeds will be used for parks and recreation projects and the series 2020B bond proceeds are planned for construction of a new police and public safety headquarters building.
S&P pointed to several additional factors that contributed to the bond rating upgrade, including the city’s commitment to integrate “climate change, storm preparedness, and sea-level rise into their long term plans and annually report to the governing body and the public on progress and investment on infrastructure improvements related to this area of risk. In addition, the city's efforts toward improving its pension and OPEB liabilities over the long term have resulted in stronger funding positions with manageable carrying costs.”
Overall, the rating reflects S&P’s opinion of the following factors for Fort Lauderdale:
- Very strong economy;
- Very strong management;
- Strong budgetary performance;
- Very strong budgetary flexibility;
- Very strong liquidity;
- Adequate debt and contingent liability profile; and
- Strong institutional framework score.
S&P Global Ratings' stable outlook reflects Fort Lauderdale's “ongoing adherence to strong financial management policies and an improving economy that will likely continue to translate into strong budgetary performance and very strong reserves.”
Moody’s Investors Service Rating Action:
In a related move, Moody's Investors Service has assigned Aa1 ratings to the City’s General Obligation Bonds, Series 2020A (Parks and Recreation Projects) and Series 2020B (Police and Public Safety Projects). Moody's has also affirmed the Aa1 rating on the city's outstanding parity general obligation unlimited tax (GOULT) debt. In addition, Moody's has upgraded the city's outstanding Taxable Special Obligation Bonds, Series 2012 to Aa3 from A1, and has revised the outlook on the general obligation bonds from stable to positive.
According to Moody’s, “The Aa1 GOULT rating is based on the city's substantial and diverse economic base that continues to exhibit healthy growth, strong financial position that will remain stable despite easing reliance on transfers from the city's utility funds, and average wealth and income levels. The rating also reflects the city's manageable debt and pension liabilities, which include $237 million from outstanding pension obligation bonds, rendering fixed costs manageable.”
The Aa3 special obligation bond rating reflects the city’s “steady trend of pledged revenues consisting of communications services tax revenues, public service tax revenues, guaranteed entitlement revenues, and business tax revenues, which provide improving debt service coverage generated from Fort Lauderdale's growing and sizable local economy.”
Moody’s positive outlook on the GOULT bonds “reflects city's expanding tax base, contributing to increased revenues that will likely support additional future debt service payments. The outlook also reflects the likelihood that the city will maintain its strong financial position.”