Archive for Wednesday, September 19, 2007

City officials pleased by bond rating

September 19, 2007

Tonganoxie's new low-risk credit rating could mean better bids from cautious out-of-state investors and big savings for the city.

Last week, Moody's Investors Service announced that the City of Tonganoxie was given an A3 credit rating, putting it around the same rating as many nearby entities.

In a press release, Moody's said one of the contributing factors for Tonganoxie's high rating is its rapid pace of growth, even though the tax base was small.

The A3 rating came as a pleasant surprise to many people at City Hall.

"It's a very good rating for a small city; I was very pleased," said Kathy Bard, assistant city administrator.

Bard said because of good financial policies and all of the time the city spends on its capital improvement plan, plus future plans for an interchange to the turnpike through County Road 1, the city was in a good position financially, and Moody's saw that.

"Things like that helped us rank high. It takes a lot of time, but it's worth it in the long run if investors see they are responsible with money," Bard said.

Tonganoxie Mayor Mike Vestal also was surprised at the high rating. He said he had expected the city would receive a rating in the B category.

"I was pleasantly surprised. For a town our size, it was very unusual. It shows that we have good fiscal responsibility. ... Kathy Bard does a heck of a job with our finances," Vestal said.

At the Aug. 27 City Council meeting, Tom Kaleko of Springstead Inc., the city's financial adviser, presented the idea of seeking a credit rating from Moody's as a way of getting better interest rates for the bonds the city was issuing for construction of a new public works facility and for construction of the new Tonganoxie Pool.

Kaleko said getting a credit rating had become a common industry practice since it allows investors a quicker way of determining whether they will invest.

"They are busy folks; they don't have time to carefully research every city," he said. "The industry relies heavily on the bond rating industries. That's why having the ratings opens up the market quite a bit."

He said in-state bond buyers already have some knowledge of the city, but out-of-state investors with no knowledge of Tonganoxie would be better served if they knew how the city was rated.

Each time the city issues a bond, the city would need to request a new credit rating. The price of the rating is determined by the amount of the bond. The city approved spending the $6,500 needed to obtain the credit rating.

Under Moody's system, Johnson County received an Aaa, which is the highest rating possible. Leavenworth County is rated at A1 and cities like Topeka and Lawrence are rated below Johnson County, but above Leavenworth County with an Aa3 score.

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