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City considers $57M in new debt

Published 9:31pm Wednesday, June 19, 2013

The City Council on Wednesday gave preliminary authorization to $57 million in new debt and set a public hearing for July 17 to get input on the bond sales.

The money will finance a variety of upcoming capital projects, including utility improvements and another round of funding for Pioneer Elementary School, currently under construction off Holland Road.

The city wants to be especially mindful of its debt because of upcoming meetings with ratings agencies, which determine the city’s credit rating. Like an individual’s credit score, the ratings affect interest rates.

Suffolk’s rating is one notch away from AAA status, the gold standard for municipality credit ratings, as judged by two ratings agencies. The third agency lists it as two steps away.

In the June 5 work session, financial adviser David Rose of Davenport and Company told council members the good ratings had come from positive financial results, an experienced management team, compliance with financial policies and a strengthening local economy that has bucked the national trend.

Rose said the city would continue to be in compliance with its financial policies even after taking on the new debt.

“We’re able to do this and still meet all of our policies, which is critical,” he said.

Even so, he doesn’t think an upgrade to the vaunted AAA status will come this year.

“I’d love to be wrong about that,” he said. “Typically, ratings folks like to do about three years in between making some changes. We think it’s too fast to see ourselves moving to the AAA.”
Rose said the rating agencies probably would want to see the country’s overall economy improve before making the upgrade.

If markets remain favorable, he added, about $13 million of existing debt also could be refinanced along with the new bond issuance.

“In my opinion, we need to look into refinancing everything we can refinance,” Councilman Mike Duman said at the June 5 work session.

If the bond issuance is approved on July 17, the bonds could be sold as early as the next day, according to a schedule included in City Council agenda documents.

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  • chief601

    Our little Obama clones at work – spend, spend and spend as long as it’s not my money. Won’t change until we vote em’ out.

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  • Roger Leonard

    I understand that refinancing can save money, but do we really need to finance more of our projects with borrowed money? This is not good policy in these time and conditions, and especially so in this economy. Interest rates will turn on us and then we will really be stuck. We need to save and have the funds ready for such needs (Pay-Go), rather than run up more debt. Debt it the addictive candy that government consumes to look good and we the people have to pay for…

    With several recent tax increases in Suffolk in hand and fees running up on everything, and the cost of utilities rising at unheard of rates; more borrowing will insure even more of the same in our futures. Is a AAA rating really worth all the pain needed to get there? Maybe, maybe not… However I can assure you that if we keep borrowing more and more, the only ones’ that will be happy is the lender, the financial wizard who makes fees upon us, and the politician going to the ribbon cuttings.

    It is time to say; no to the government “crack” of easy borrowing and paying with our children’s money. It is time to say; if we cannot fund most of what we want and build with our own money, we wait until we can, with perhaps some small borrowing, if any at all. Who would run their own finances, as we see the city running ours’? Responsible planning from the “Best City Manager” in the area? I think not…

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    • mab1960

      Rodger,

      Excellent analysis and thoughtful insight…thank you for sharing your thoughts. I am extremely disturbed by the current direction our city is going, frankly, it feels that we are in the proverbial wooden barrel approaching the crest of Niagara Falls. This isn’t fiscal irresponsibility…just your average financial ignorance. While the good citizens of Suffolk are struggling with our own economic burdens, the City “Leaders”, bloated with tax dollars, are trying to live a champagne and caviar lifestyle on a hamburger/salted pork budget.

      I have stated before in previous forums that Elected Officials and Civil Servants have an obligation to the citizens in being good stewards of the tax dollars…we deserve better than this. What’s next, a rip-off version of the Chapter Jackson rap song whereas “EBT” stands for Expropriations-Bonds-Taxes?

      I really shudder to think what is going to happen next…I pray every day for some form of adult supervision within our elected/senior officials. We are being set up for failure…when this falls apart we will be left holding the bag while the people responsible run for cover.

      Just a few thoughts.

      Respectfully,

      mab

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      • Roger Leonard

        mab,

        That will not happen, until we elect more responsible adults… Try as you may, change will not come with the crew that now leads Suffolk.

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