As Budget Season Starts, Fitch, Moody's and S+P Affirm AAA Credit Rating
March 29, 2021 10:29 AM
by Gigi Decavalles
In the last week, all three of the United States’ leading credit rating agencies -- Moody’s, S+P, and Fitch Ratings -- affirmed the City of Santa Monica’s AAA credit rating. Fitch shared that the ‘AAA’ credit rating is “is driven by the exceptional resilience of the city to periods of economic stress, underpinned by its very high reserves, notwithstanding recent large operating deficits, and a strong expenditure framework.”
This is the highest credit rating available and is an important indicator of the City’s strong fiscal health, particularly after the last year of devastating revenue reductions.
S+P and Fitch also gave a strong AA+ rating to the City’s existing lease revenue bonds and also assigned the same rating to lease revenue refunding bonds to be issued by the City this week, while Moody’s gave a Aa2 rating to the lease revenue bonds, the highest rating it will give to a lease revenue bond for a parking structure not directly serving a core government facility such as a city hall. The refunding bonds will take advantage of a reduction in interest rates since the bonds were initially issued in 2011 to fund construction of Parking Structure 6. It is estimated that issuance of Refunding Bonds at this time would allow the City to reduce its future lease payments on Parking Structure 6 by $4.1 million and result in significant savings to the General Fund.
“Financial resilience through downturns is exceptionally strong. The city maintains very robust reserves to offset limited revenue volatility and has adequate ability to adjust budgets to maintain balance via spending adjustments. Budget management in times of recovery is very strong with consistent attention to long-term fiscal sustainability.” - Fitch Ratings
The rating confirmation comes as the City prepares its biennial budget for FY 2021 – 2023. The formation of the City budget is an important public process that is both a reflection of the City’s values of accountability, equity, inclusion, innovation, resilience, safety, and stewardship and the Council-adopted community priorities of Addressing Homelessness, Clean and Safe Santa Monica, and Equitable and Inclusive Economic Recovery. Here’s the budget timeline so you know participation opportunities on the horizon:
April 13: City Council meeting to set the timing structure for allocating the American Rescue Plan stimulus within the allowable areas outlined in the bill and over a four year period. For more on Santa Monica’s $29.3 million allocation, read this press release.
May 10: The FY 2021-2023 budget book will be become available to the public.
May 25: City Council study session to review and provide feedback on the budget in advance of adoption.
June 22: City Council will adopt the final FY 2021-2022 budget and approve the budget plan for FY 2022-2023
For the latest information and to get budget updates in your inbox, sign up for our weekly community newsletter at www.santamonica.gov/newsletter.
Authored By
Gigi Decavalles
Finance Director