Posted by: Noël Jones
At Wednesday's city council meeting, Mayor Panto announced that Standard and Poor's, after reviewing Easton's finances for the last few years, has upgraded Easton's municipal bonds to an A- rating from its previous BBB+ rating. Even more encouraging was the statement from Standard and Poor's as reported by Ed Sieger of the Express-Times in his artcle today:
"We expect that the city will maintain at least good reserve levels going forward due to its additional revenue-raising flexibility and track record of trimming expenditures as needed under the city's new management team."
This comes in contrast to a recent article by Elena Moya in guardian.co.uk highlighting the fact that over 100 cities in the U.S. are overdrawn and on the verge of collapse:
"More than 100 American cities could go bust next year as the debt crisis that has taken down banks and countries threatens next to spark a municipal meltdown, a leading analyst has warned.
Meredith Whitney, the US research analyst who correctly predicted the global credit crunch, described local and state debt as the biggest problem facing the US economy, and one that could derail its recovery."
Mayor Panto and his team are to be commended for navigating this city through a recession so well as to warrant an upgrade, when other American cities are in massive debt and in danger of going under completely--pretty impressive.
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10 comments:
I doubt that most residents know the positive impact this has on our city. Especially in light of so many other communities having down ratings. This is an indication that our city is being managed well financially. First time in years. I don't know how they are doing but congrats and keep up the good work.
It is seriously reassuring to get this news in the middle of a recession when so many other cities are under financial duress. The mayor deserves are appreciation on this one.
Wow, what a difference a few years makes. Nice job. And more and more people are appreciating it. We are no longer the forgotton child of the Lehigh Valley!!!! Read and weep Bethlehem and Allentown.
Wasn't Easton ready to file with the state bankruptcy under Mitman?
It is wrong to think that most cities did not improve their credit ratings. Both Moodys and Standard and Poors changed their benchmarks and recalibrated municipal ratings resulting in increases for most municipalities. I really wonder what all this means for our city. I think when ever a grade goes up, it is better than a grade that goes down. Other than that I don't know what that positive impact is that is suggested by the first poster. Maybe the poster will elaborate?
many municipal ratings have gone down-----just look west to Reading or Harrisburg. And I am sure given the news reports that Bethlehem will go down as well. The difference here is that the report said that the city's overall rate went up. That is a judgment of the financial team and how the city is financing its services. A lot of benchmarks go into the overall rating so this is good and shows the administration is going a good job. If and when the city goes for a bond, the bond itself will be rated agian based on a number of factors like ability to pay, where the revenue is generated, etc.
All in all this is really good news given the overall econimic climate. The mayor and his staff have every right to be proud of this report. It doesn't come easy. For example I am sure that S&P looked at health benefits and saw that union employees are now bearing part of the costs. S&P is happy but I am sure the mayor isn't high on the unions list. Good decisions in local government requires employees to give up some of the extremely lucrative benefits only government employees receive.
Your information is not correct: "many" is wrong. Perhaps "some" would be a better label. I am an investor. No municipality goes to market with an A- rating. You need AAA to be able to find an underwriter and you need to purchase bond insurance through a AAA rated insurance company. I don't question that it is good for the ego to get a grade of A and I don't take anything away for that grade. There are two errors in this story that bond ratings are going south for a number of municipalities and that there is an immediate benefit to taxpayers. If you speak as an authority, reveal yourself otherwise yours is only opinion and, in my opinion, very wrong.
An interesting debate...
I assume the two of you Anons (it would be great if both of you would post your names, or at least a moniker so that it's easier to follow the discussion so please consider it) are talking about local municipalities or perhaps municipalities in PA, because the Guardian article I posted outlines a nationwide issue with municipalities facing bankruptcy.
However--I am very interested in this discussion and knowing whether or not an A- bond can get garner insurance and be sold as a AAA bond (a la CDOs [collateralize debt obligations]).
But what's good for the goose is good for the gander--please either post your names, or a moniker, or better yet, a link to back up your points so that readers know what they're reading--thanks.
in response to your question:
http://www.thinkassuredguaranty.com/faqs/ for basics about municipal bond insurance from assured guarranty, a player.
Investinginbonds . com a statement supporting recalibration of municipal bonds
“ In early April 2010, Fitch Ratings overhauled the way it assigns grades to the credit quality of state and local governments, recalibrating ratings on 40 states, the District of Columbia, the Virgin Islands and Puerto Rico. The move affects some 38,000 municipal bond issues. The rating agency's wholesale recalibration is in part recognition that municipalities were being held to a higher standard than corporate and sovereign debt. Moody's Investors Service also started to recalibrate its universe of municipal bond ratings in mid-April 2010, beginning with changes for 34 states and Puerto Rico.”
Closest example of a significant jump in rating due to credit enhancement is the Philadelphia School District 447 Million GO within the past month. The issue had an underlying rating of Ba1 or BBB+ and an enhanced rating of AA2 or AA+ after credit enhancement-either bond insurance or letter of credit. That placed these bonds as high quality as compared to medium grade.
Don't get me wrong. The grade of A- is great. Too many other things which are not true are being linked to the rating
Thanks for the thorough info, Anon.
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