At the regular meeting of the Pleasanton City Council held Thursday, August 7, Mark McLiney, Southwest Securities, Inc., shared the improved rating the city received from Standard & Poor’s Ratings Services.
He enthusiastically explained that the city’s underlying rating was raised from A+ to AA. “For those on your staff who have worked with this before, you know how important this rating is,” said McLiney. He explained that the ratings reflect the following factors of the city – which he highlighted from the report furnished by Standard & Poor’s report:
•Adequate economy, which benefits from access to the broad and diverse San Antonio-New Braunfels metropolitan statistical area (MSA);
•Strong management condition with good financial practices;
• Very strong budgetary flexibility, with reserves at over 100% expenditures;
•Very strong liquidity, with cash and cash equivalents at strong levels to cover debt service and total government fund expenditures;
•Adequate budgetary performance; and
•Weak debt and contingent liabilities profile.
The certificates of obligation are secured by the city’s levy of a direct and continuing ad valorem tax on all taxable property within the city. Additional security is provided by the city’s pledge of a limited amount of net revenues from the city’s combined utility system. ¬
According to the Standard & Poor’s website, the general meaning of their credit rating opinions is summarized below. ‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating. ‘AA’—Very strong capacity to meet financial commitments. ‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances. ‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions. ‘BBB-‘—Considered lowest investment grade by market participants. ‘BB+’—Considered highest speculative grade by market participants. ‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions. ‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments. ‘CCC’—Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments. ‘CC’—Currently highly vulnerable. ‘C’—Currently highly vulnerable obligations and other defined circumstances. ‘D’—Payment default on financial commitments. Note: Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
“Pleasanton’s management conditions are strong, in our view, with “good” financial practices under our Financial Management Assessment (FMA) methodology, indicating financial practices exist in most areas, but that governance officials might not formalize or regularly monitor all of them,” the report stated. The assessment was raised from “standard” to “good” due to the city’s adoption of a reserve policy equal to two months’ worth of operations.
Councilmembers then approved Ordinance No. 14-1115 of the City Council of the City of Pleasanton, Texas, awarding the sale and authorizing the issuance of City of Pleasanton, Texas, Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2-14; levying a tax and providing for the payment thereof; authorizing the execution of delivery of a Paying Agent/Registrar Agreement; approving the Official Statement; enacting other provisions relating thereto; and declaring an effective date.
Standard & Poor’s is a credit-rating agency (CRA) that issues credit ratings for the debt of public and private companies and other public borrowers such as governments and governmental entities. It has been designated as a nationally recognized statistical rating organization by the US Securities and Exchange Commission.
Southwest Securities, Inc. assist cities in developing bond financing programs.