BRADENTON, Fla. - New Orleans will be buoyed by its first-ever bump into the double-A rating category when it ventures into the market next week.
Ahead of the deal, S&P Global Ratings upgraded New Orleans' $531.9 million of outstanding GOs to AA-minus from A-plus, the highest mark ever given to the city's bonds.
The city expects to price $50 million of general obligation refunding bonds Wednesday.
"We base the upgrade on our view of New Orleans' improvement in current and projected economic wealth and income levels and total available reserves as a percent of expenditures," said S&P analyst Jennifer Garza.
Moody's Investors Service affirmed its A3 rating.
Both agencies assign stable outlooks.
A Fitch rating was not available at publication time.
Mayor Mitch Landrieu said that S&P's upgrade is the fourth since he took office in 2010, and it is now higher than the city's BBB-plus GO rating before Hurricane Katrina hit in August 2005.
In the aftermath of Katrina's devastation, S&P lowered its ratings to B in December 2005.
The rating returned to investment grade with an upgrade to BBB in 2009.
"Upon taking office in 2010, we confronted New Orleans' fiscal challenges head on and with eyes wide open," Landrieu said.
The upgrade is "continued validation of the progress we have made not only closing the huge $97 million budget hole we inherited, but in reviving the city's finances by cutting smartly and reorganizing government and delivering better services," he said.
In fiscal 2015, New Orleans had a fund balance of 12.3% of operating expenditures or $75.3 million.
Increases in tax revenue tied to stronger consumer spending and commercial development helped boost the general fund by more than $32 million at fiscal year-end 2015, S&P said.
Officials project that the city will end fiscal 2016 with an available general fund balance of about $54 million.
New Orleans plans to maintain a fund blance around $50 million for the next two years and work to build the general fund balance up to 10% of recurring revenue in 2020.
"In our opinion, New Orleans' liquidity is very strong with total government available cash at 16.3% of total governmental fund expenditures and 124.9% of governmental debt service in 2015," Garza said. "In our view, the city has exceptional access to external liquidity if necessary."
The New Orleans Board of Liquidation, City Debt, created by the Legislature, manages the city's bonds. Ad valorem property tax revenues securing the GOs are immediately segregated and paid to the board, which is responsible for paying debt service.
If tax revenues are insufficient the board can use funds on hand and levy an additional tax to make bond payments.
In the next few months, New Orleans will bring to market a $70 million new-money public improvement GO bond deal to finance street and facility improvements.
It will be the first issuance of a $120 million bond authorization by voters in April.
Wednesday's transaction is structured with serial bonds maturing between 2017 and 2036.
Bond proceeds will refund all or a portion of the city's 2007A public improvement GOs for debt service savings without extension of maturity.
Officials estimate that the deal will net present value savings of 19.84% or $11.9 million.
New Orleans' financial advisors are Public Financial Management Inc., and CLB Porter LLC.
Bank of America Merrill Lynch is the book-runner for Wednesday's refunding. Co-managers are Dorsey & Company Inc., Loop Capital Markets, and Raymond James & Associates Inc.
Co-bond counsel firms are Foley & Judell LLP, Haley Law Firm LLC, and McKee Law Firm LLC.
Underwriters counsel is Breazeale, Sachse & Wilson LLP.