City considers $57M in new debt
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.