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Salisbury Business System Bonds Fitch Ratings Improve

Salisbury Business System Bonds Fitch Ratings Improve

Fitch Ratings has assigned an 'AA-' rating to the City of Salisbury’s $38.7 million combined enterprise system revenue bonds, series 2020. In addition, Fitch Ratings upgraded the approximately $9.0 million combined enterprise system refunding revenue bonds, series 2010 to 'AA-' from 'A+'. The rating outlook has been revised to stable from positive.

Per a news release from Fitch, “The system has maintained strong liquidity and debt service coverage in line with Fitch's 'AA' medians after significant weakening several years ago due to the system's financial support of the city's broadband network. Financial support of the network has since ceased and management's forecast points toward stability in the system's financial performance through fiscal 2025.  The upgrade to 'AA-' from 'A+' reflects the system's sustained financial performance for the past five fiscal years. Financial improvement has been bolstered by annual rate increases.”

Citing the water system's low debt burden, Fitch expects that “Salisbury should sustain strong financial margins while ensuring sufficient resources for capital needs, like upgrades and other large maintenance and building projects. The enterprise provides an essential service, and water supply and treatment capacity are well in excess of demand.”

The 2020 bonds are scheduled to sell via negotiated sale this week. Proceeds of the bonds will be used to refund a portion of the city's outstanding series 2009 and 2010 Water and Sewer Revenue bonds, finance various capital improvements to the combined water and sewer enterprise system, including improvements to the city's water treatment plant, and improvements to the city's Grant Creek wastewater treatment plant and pay issuance costs. 

In addition, S&P Global Ratings assigned its AA- rating to the 2020 bonds as well. The outlook is stable.

“Based on our operational management assessment (OMA), we view the water and sewer enterprise to be a '1' on a six-point scale, with '1' being the strongest. This indicates, in our view, that operational and organizational needs are proactively addressed. An OMA of strong reflects good asset management programs for monitoring existing infrastructure; the lack of additional capacity needs; and drought and disaster management plans, if needed. There is also sound succession planning within the organization at all levels.”

“Based on our financial management assessment (FMA), we view the city as a '1' on a six-point scale, with '1' being the strongest. We also assigned a FMA of strong, indicating we consider financial practices sound and comprehensive.”

“I’m incredibly proud of our finance department and its dedication to making sound financial decisions for Salisbury,” said City Manager W. Lane Bailey. “This revised rating confirms that we’re moving in the right direction as stewards of tax payer dollars. We will continue to look for potential savings, where applicable, to further improve the City’s financial status.”

“I am very proud of the work our city management and finance team has been doing to ensure that we receive the best possible rating as we go into the bond market for new debt in over 12 years,” said Shannon Moore, Salisbury’s finance director. “Along with low interest rates in today’s market, this is the next best possible news our community could receive as it provides a lower cost to our rate payers for the new debt we are issuing.”

  • 24 March 2020
  • Author: Finance
  • Number of views: 759
  • Comments: 0
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