Town receives high bond rating
By Staff
Town of Culpeper officials were pleased with the ratings given by two New York bond rating services for the sale this month of general obligation bonds, which could save taxpayers about $2.7 million over the life of the loan.Moody’s Investor Services and Standard and Poor’s gave the town high marks. The higher the rating the less it costs taxpayers in interest to pay back the loan.
The town needed the ratings to sell $18.7 million in general obligation bonds to finance a portion of the $28 million expansion of the sewage treatment plant and other smaller capital improvement projects. The town coffers already contained significant money collected from tap fees to pay for a large portion of the sewer plant upgrade.
In mid-March, a delegation of town officials and representatives from Davenport and Company, the town’s financial advisors, met with officials from the two Wall Street rating firms. The town made a presentation about the town and its financial health. The town group, comprised of Mayor Pranas Rimeikis, Councilman Chip Coleman, Interim Town Manager Tom Huggard and Treasurer Neal Deane, also answered questions asked by the Wall Street firms.
Deane said that prior to the recent visit the town didn’t have an active bond rating. The town was rated in the early 1990s but hadn’t been rated since. If the town had issued general obligation bonds without appearing in front of the New York City rating groups, the town would have been paying about $90,000 per year in extra interest for the next 30 years or $2.7 million. At today’s tax rate, that is more than one-half cent on the real estate tax rate.
Deane called the process of presenting the town’s information as “very intense and data driven.”
“The high rating from two Wall Street bond rating companies shows that the town is financially sound and they view us as making good financial and business decisions,” said Councilman Coleman. “The town is a corporate business and needs to be run like one for the benefit of all the taxpayers. I think this high rating proves that.”
In its summary to town officials, S&P agreed.
“Culpeper’s financial position is strong,” the report said, using information from 2004 to 2007. “Over the same period, the town has maintained an unreserved undesignated general fund average equal to a very strong 34.7 percent of total expenditures.”
S&P also realized that growth recently has slowed in the town, which experienced 29 percent population growth from 2003. But the firm also highlighted the town’s low debt levels, strong financial performance and strong appreciation of its tax base.
Deane said the town currently holds a general fund debt of about $7 million, which is only 4.5 percent of the debt limit of $155 million the town could carry.
The Standard and Poor’s report also noted that the town’s finance department looks at historical growth figures dating back five to eight years, current economic conditions and future economic forecasts. The finance department also was lauded for providing monthly budget reports to department heads and having a formal mid-year review of the current budget.
In addition, the town also has a formal capital improvement plan, has a new reserve policy and adheres to “statutory” guidelines covering investment and debt management, said the report.
Moody’s, the other rating company, also cited “healthy financial operations” and “strong liquidity of enterprises” in offering its rating. The firm also noted that the town’s values have tripled since 2003 to $1.7 billion tax base.
The New York rating agency also noted Culpeper’s previous “pay-as-you-go” philosophy on some capital projects reduced its undesignated fund balance but the money available remains a substantial $3.9 million.
“Moody’s views the historically strong balances as an important factor in the assignment of the A1 rating,” the report stated.
“I felt like we had a strong balance sheet to show them,” Deane said. “In that one-and-a-half to two-hour period they didn’t leave many stones unturned.”
The town plans to sell the general obligation bonds in late May.