Standard & Poor’s last week changed the outlook on Atlanta’s general obligation bonds to stable from positive while affirming a AA-minus rating.
The change comes as the city is readying a $37 million deal for next week. Standard & Poor’s assigned its AA-minus rating to the city’s Series 2008A bonds, which will carry insurance from Financial Security Assurance Corp.
Proceeds from the deal will be used to fund various capital projects that the city has deferred over the years.
Standard & Poor’s said Atlanta’s outlook revision is based on fund balances that, while declining, remain healthy. Analyst John Sugden-Castillo also said that the AA-minus rating reflected the city’s diversified regional economic base that is poised to outpace the national employment growth rate over the next five years and reserve levels that remain strong. In addition, Atlanta maintains conservative management practices and moderate debt ratios with manageable general fund-supported capital needs.
“The previous positive outlook reflected management’s efforts to rebuild financial reserves and maintain structural balance; however, the city’s financial position is not as strong as in the past even though Atlanta’s reserves remain healthy, thus prompting our revision to a stable outlook,” Standard & Poor’s said. “Management’s ability to address current and future financial pressures associated with increased pension costs, police overtime, subsidies to the sanitation fund, and a declining housing market is important from a credit standpoint.”
The report said the city’s financial position has weakened over the past three years, partly due to higher pension costs, police overtime, and sanitation fund subsidies that resulted in a $6.1 million operating deficit for fiscal 2007.
Next week’s deal will be underwritten by Jackson Securities.
