KINGSPORT ‚¬ Six financial services institutions entered bids on Monday for two City of Kingsport bond issues, garnering interest rates of 2.695 and 2.73 percent, while both Moody’s Investors Services and Standard & Poor’s Ratings Services reaffirming the highest City credit ratings in history on the issues.
Moody’s assigned a rating of Aa2 to City debt, it’s second highest rating category, which indicates “very strong credit worthiness” relative to other US cities and tax exempt bond issuers.
S&P’s AA rating is also its second highest category and indicates Kingsport has a “very strong capacity to meet its financial commitments.”
The two rating companies use differing methodologies, with S&P confirming its stable rating outlook while Moody’s kept its outlook at negative for the rating.
Moody’s indicated it would like to see a larger financial reserve, with growing the City’s rainy day fund a top agenda item for City Manager Jeff Fleming.
“We’re pleased to have the solidity of City finances reaffirmed by two of the most important rating companies in the world,” Fleming said. “In past years, we have drawn down the rainy day fund a bit for capital needs, including repaving, but going forward, I believe the Board of Mayor and Aldermen stands fully behind the effort to build the reserve.”
Currently, City reserves that can be appropriated by the Board at any time stand at $11.5 million in the General fund, with another $3.8 million in the Fleet Fund. Fleet Fund dollars ‚ are generated by vehicle services charged to City departments and accumulated for vehicle repurchases, but are not mandated to be spent in that manner.
The City also maintains several million dollars in other internal service funds that could be redirected by the Board should need arise.
S&P also noted that the City only spends about 7.5 percent of its budget to service existing debt.
Both rating companies stated their view of a strong tax and employment base, growing commercial/retail sector that has greatly diversified the local economy, as well as strong financial management that has taken steps to lessen future pension obligations and maintain sufficient revenues to fund government services.
In the General Fund, which excludes utilities, the City will issue $15.6 million for repaving, public school improvements, public recreational facilities including the new baseball/softball complex, HVAC improvements, construction of a new landfill cell, and public safety vehicles.
Another $9.30 million in ratepayer supported debt will be issued for the City’s water and sewer utilities to finance needed improvements in those systems, principally in the form of sewer expansions that generate new revenue for the system.