FOR IMMEDIATE RELEASE: Aug. 16, 2004
City receives vote of confidence from Wall Street
Moody’s Investor Services, Standard and Poor’s, and Fitch have confirmed the City’s General Obligation Bond ratings for its sale of $95,700,000 in General Obligation Bonds scheduled for Aug. 26.
The proceeds from the bond sale will be used to finance infrastructure and capital improvements, including street and bridge repair and catch basins, and improvements to the Liberty Memorial and the Kansas City Zoo.
“The City is pleased to have this confirmation of our high credit ratings from the three major credit rating agencies. This is external proof that the City is on the right path regarding its financial planning and its efforts to revitalize the downtown area and improve our neighborhoods and infrastructure throughout the city through the sale of municipal bonds,” City Manager Wayne A. Cauthen said.
“These positive ratings affirm that the actions the council has taken in recent years are on target. It shows that we are taking the right steps to stimulate the local economy and expand the tax base,” Mayor Kay Barnes said.
Moody’s Investors Service assigned an “Aa3” rating with a “stable outlook” to the bonds. Moody’s has revised the City’s credit outlook to stable from positive primarily due to recent financial challenges, including the planned issuance of a significant amount of additional new debt.
The “Aa3” high-grade rating reflects the City’s substantial and diverse economy despite recent economic sluggishness; a sound financial position that experienced reductions in reserves recently; healthy liquidity in governmental funds; and higher than average, though manageable, debt levels with significant additional debt expected.
Moody's believes that despite the recent effects of the sluggish economy, includingweakness in sales and income tax collections, Kansas City’s increasingly diverse employment base, land available for development, and expected downtown redevelopment will lead to long-term growth in the City’s property, sales and income tax bases.
The Moody’s report noted that coupled with the potential for new development, city management has made concerted efforts to revitalize the downtown, including the establishment of several TIF districts and substantial brownfield remediation efforts.
The current downtown master plan includes residential, commercial, and civic development.
Standard and Poor’s outlook on the bonds is “stable.” The “AA” rating reflects Kansas City’s: position as the regional center of a strong and diverse economic base; growing population and tax base with ample open space available north of the Missouri River for additional growth; and satisfactory financial position despite recent general fund balance drawdowns.
An offsetting factor is the City’s reliance on economically sensitive income taxes for a large portion of general fund revenues, and its growing debt burden, which has now reached the high range. The “AA” rating is the third-highest rating given by Standard and Poor’s.
Standard and Poor’s stable outlook is based on the expectation that the City will maintain at least balanced financial operations as its population and tax base continue to grow.
The rating from Fitch on the bond sale is “AAA,” the highest on its scale. The rating is based on the City's diverse economic and tax revenue structure; consistently strong financial performance; moderate debt levels; and excellent financial control systems.
According to Fitch, the City has achieved a record of steady financial improvement through strong management practices as it endeavored to respond to neighborhood public infrastructure needs. Increased internal funding of capital projects has limited the growth of tax-supported debt, which remains moderate. Labor relations are strong and future personnel costs are expected to be within normal budget constraints. Although a weaker economy has forced the City administration to significantly reduce budgetary spending and personnel levels, the City's financial position is expected to remain stable.