Standard and Poor’s has awarded the City of San Marcos a AA- rating and recognized the city’s financial management position as “Strong,” which is the rating agency’s highest category.
The rating came as a result of a credit rating application the city made when it prepared to sell $8.09 million in tax and revenue certificates of obligation. The bonds will be used for improving and extending the city’s electric system, FM 2439 Hunter Road electric improvements, and placing downtown overhead electric lines underground.
The city council authorized the bond sale at its Dec. 6 meeting.
More than 30 investment banking firms bid on the purchase of these bonds, which were ultimately purchased by BOSC Inc. at an interest rate of 3.5 percent. This is the lowest interest rate the City of San Marcos has ever been able to receive in regards to its sale of 20-year debt.
The city on Nov. 16 refinanced existing debt totaling $14.8 million. The refinancing took advantage of a lower interest rate on the existing debt, bringing it down from between four to five percent to 3.09 percent over the life of those bonds. This refinancing will result in almost a $1 million savings to the City of San Marcos Water/Wastewater Utility.
The city’s credit rating is used by investors to make decisions regarding which investments they buy, and it takes into account the local economy, financial position of the city, the debt position of the city, and the city’s financial management.
Dan Wegmiller, the city’s financial advisor, provided an overview of the rating report submitted by S&P. The rating report listed the city’s financial performance as “Strong” primarily due to conservative budgeting techniques.
One of the comments in the rating reports indicated that an increase in wealth/income levels coupled with moderation of debt levels could lead to a positive rating action.
“This last comment is language that is not commonly used in rating reports,” Wegmiller said. “Most rating agencies will only list cities as stable when they receive a rating report.”
“This would imply that there is upward pressure on our financial rating being considered by S&P,” said city Finance Director Steve Parker. “We are encouraged by our strong rating and confident in our fiscal plan.”Email | Print