Upgrade Boosts Portland, Maine, Capital Plans
Portland, Maine, is on the upswing financially as it gears up to address capital improvements.
Portland was upgraded one notch to AA-plus on Feb. 24 by S&P Global Ratings, citing the city's improved budgeting and boost in reserves. The first-ever S&P upgrade for Maine's largest city puts it in line with Moody's Investors Service, which rates Portland debt at Aa1.
"It gives us a little bit more flexibility with our debt service costs going forward," said Portland finance director Brendan O'Connell. "We have been working hard toward the upgrade with S&P for a while and working on improving our financial policies."
S&P analyst Anthony Polanco noted that the city's available fund balance in the 2016 fiscal year equated to a healthy 16% of operating expenditures. Polanco noted that Portland improved its available reserves from $39 million in 2015 to $42 million for fiscal 2016 and the city has a formal policy of maintaining available reserves at a minimum of 8% of general fund expenditures. The current 2017 budget includes a fund balance appropriation of $750,000, but the city does not expect any drawdowns of the reserves by the end of the fiscal year on June 30.
"Their strong budgeting practices and policies have been a factor in consistently maintaining strong reserves," said Polanco. "They have discipline and good management."
Portland approved a five-year capital improvement plan last year that projects around $12 million of new borrowing annually to address improvements to municipal buildings, parks, roads and sidewalks. O'Connell said the city council is also exploring floating $64 million in bonds for repairs at four elementary schools, which would require voter approval. The city entered 2017 with $210 million in debt outstanding, according to O'Connell.
O'Connell attributed the improved fiscal conditions largely to conservative budgeting and maintaining manageable debt levels. The city also received better-than-expected tax revenues from building permits and parking along with $2.1 million in sold property.
The improved bond rating also arrives after Portland officials finalized a new 10-year comprehensive plan. A draft of the plan notes that the city wants to invest in infrastructure improvements through public-private partnerships. The city is anticipating population growth in the next decade and wants to have road, parking and sewer infrastructure to accommodate additional residents.
"The new comprehensive plan emphasizes sound capital planning and a 'fix it first' philosophy," said Jeff Levine, director of Portland's Planning & Urban Development Department. "It also explains the fiscal needs of the city and why growth is an important part of meeting those needs."
The 10-year plan also outlines the importance of Portland using tax increment financing to help spur economic development.
Portland has in the past used TIFs for individual projects but lately has applied this strategy toward downtown transit investments with the city retaining a portion of the increased property tax revenue to fund capital and operating expenses. Levine noted that TIF funding can also be used as a credit enhancement for certain developers to produce projects with public benefits such as affordable housing.
"TIF funding allows the city to create predictable funding streams for public improvements," said Levine. "Going forward, we are hoping to use TIF districts in a more systematic way, to fund needed public improvements that will in turn result in higher quality of life and beneficial investment in the city."
Some Portland residents and sports fans may have a bitter feeling left over from one of the city's previous bond-funded efforts.
A year ago, the city's minor league hockey team, the Portland Pirates, bolted town for Springfield, Mass. The loss of the American Hockey League franchise came just five years after Cumberland County voters approved a $33 million bond plan to modernize Cross Insurance Arena.
O'Connell said prospects appear high for a new professional hockey team from the lower-level ECHL to move into the downtown Portland arena next year, which would provide a big economic boost to nearby businesses.
"It's a big part of the local economy especially on game nights," said O'Connell on the importance of the county-owned Cross Insurance Arena housing an anchor tenant. "It would be huge to get a team back in town."
Portland is 110 miles north of Boston with a population of 66,194 recorded by the 2010 U.S. Census, making it Maine's most populous.
S&P noted that Portland is aided by a diverse property tax base that features the Maine Medical Center with 7,000 employees and UNUM/Provident Corp., an insurance company that employs 2,860. The northern New England city will also be aided, according to S&P, by new projects that include a P3 for 400 market-rate apartments and a $105 million development called Thomson's Point, which will feature a convention center, hotel, sports medicine facility and 700-space parking garage.
"Portland is really the economic hub of Maine," said S&P analyst Victor Medeiros. "It has been less vulnerable to the macroeconomic forces the state has been seeing."
S&P also noted that Portland has a strong projected per capita market value of $117,215. The city's overall market value grew by 1.9% over the past year to $7.8 billion in 2017, according to S&P.
Portland has recently tackled infrastructure investments in its ports derived largely from state and federal money, which will position the city for future economic growth given its close proximity to Canada, according to Ryan Wallace, director of the Maine Center for Business and Economic Research at the University of Southern Maine. While Wallace noted the city has a backlog of deferred maintenance projects, he credits the city with having strong fiscal controls and positioning itself for future revenue opportunities without taking on too much debt.
"Compared to the rest of the state, Portland is very much the economic engine," said Wallace. "It's been a big driver of most of the economic growth for much of the last decade."