ATLANTA -Standard & Poor'sTuesday upgraded to AA-plus from AA the general obligation rating it assigns to Knoxville, Tenn.
The upgrade reflects the city's stable and expanding regional economic base, according to the ratings report that was authored by Standard & Poor's analyst Sarah Smaardyk.
In that report, she said that the city benefited from being anchored by the University of Tennessee, as well as having a steadily expanding property tax base, strong financial management, and a manageable capital improvement plan. The rating agency also commended the city for its annual pay-as-you-go funding of capital projects.
"We believe Knoxville officials will sustain the city's strong financial performance and position and maintain its overall moderate debt levels," Smaardyk said.
One of the factors that offset the city's strengths are its below-average income levels, according to Smaardyk.
Knoxville finance director Jim York said that city officials were naturally pleased with the news of the upgrade.
"The current mayor has been very active in trying to keep the city on firm financial footing," York said.
The upgrade comes as the city continues to map out plans for its most pertinent financial needs. However, the city has not finalized plans to go to the market immediately at this time. Instead, they are evaluating several projects, and they are considering going to the market in the summer or fall. York said the deal could be in the neighborhood of $20 million. He also said it could be more if the city decides to refund some of its outstanding debt.
While the slowing economy has taken a toll on municipalities throughout the country, Smaardyk pointed out that the Knoxville has reported four consecutive operating surpluses, including a $10.7 million surplus in fiscal 2007.
She also noted that the city had to budget an $8 million drawdown of the general fund in fiscal 2008 to cover its pension system and one time capital expenses. Finance officials are still projecting it will only draw down roughly $4 million at fiscal year-end.
The city is rated AA-plus by Fitch Ratings and Aa2 by Moody's Investor Service, York said.
Mayor Bill Haslamis scheduled to begin holding budget hearings for fiscal 2009 at the end of the month. The goal is to have the fiscal 2009 budget in place by June of this year.
The mayor's office and finance officials have expressed confidence that despite the economic slowdown, the city could anticipate revenues to come in at about $165.5 million by the end of fiscal 2008, which would be $2.5 million more than projected. The fund balance had been projected to be about $42 million.
