News & Announcements
RELEASE: City Earns 'AA+' Ratings from Top Ratings Firms Fitch and S&P
Positive ratings reinforce City efforts to strengthen financial policies and long-term fiscal outlook
Santa Fe, NM – Both Fitch Ratings and S&P Global have awarded Santa Fe’s gross receipts tax bond a ‘AA+’ bond rating. This $20 million bond measure is focused on making major infrastructure improvements and includes a new fire station on the Southside, upgrades at all recreation centers, repairs at City libraries, and much more.
In recent years the Governing Body and administration have made financial strength a priority: eliminating a $15 million structural deficit, ending the use of cash balances to cover shortfalls, and responding to the McHard Report risk assessment and the FY2017 audit with extensive improvements to the City’s policies, procedures, and management practices. Those efforts contribute directly to the City’s continued success in earning strong bond ratings.
The strong ratings are based on the underlying condition of the City’s financial health and credit quality, a positive local economic outlook, and the reliability of the GRT as a stable source of long-term revenue.
In their summary report, S&P Global stated, “(Santa Fe’s) underlying economic fundamentals, strong tourism industry, and stabilizing presence of the state capital has led to a growing sales tax base. Reflecting the City's economic depth and diversity, median per capita effective buying income is strong, in our opinion, at 120% of the national average. The county unemployment rate is 4.6%.”
Fitch cites Santa Fe’s renewed strength in both the commercial and residential construction, strong foundation in the public sector, and growth in the healthcare industry in their rating analysis. They also make note of the City’s financial resilience: “The City's strong financial resilience is derived from a combination of revenue and expenditure flexibility and solid reserve levels. Aggressive budget cuts in the wake of the last recession allowed the City to maintain strong fund balances…the City's general fund balance remains strong at 15.5% of spending. Unaudited fiscal 2018 results include a modest net general fund surplus ($882,000, or 0.9% of spending). Year to date GRT revenues are up by 6.6% for the first three months.”
Mayor Alan Webber said, “A strong bond rating like this one means when we break ground on the new Southside fire station or rebuild the Chavez Center, we’ll be able to do it at a much lower cost for Santa Feans. That’s a big deal: The work this administration has done to modernize and improve the way our City is managed is already paying dividends.”
This is the first GRT bond the City has issued in over four years. It is part of an effort to establish a more systematic and strategic approach to issuing debt that can finance needed capital infrastructure improvements on everything from roads and bridges to parks, playgrounds, and recreation centers. By acting now, the Finance Department is helping save the City millions of dollars in advance of Federal Reserve rate increases expected later this year.
BACKGROUND: In government finance, a bond rating is a “grade” assigned to a bond or bond issuer to indicate its riskiness. Each specific bond issue gets a rating, although they are tied to a City’s overall credit worthiness. The City’s recent Gas Tax Bond to re-pave many of Santa Fe’s busiest roads also earned a ‘AA+’ rating. The rating system indicates the likelihood that the issuer will default either on interest or capital payments.
Credit ratings matter because they can help the City save millions of taxpayer dollars in interest payments over time, and increase borrowing power at a decreased cost for the City of Santa Fe and its residents. It is also a direct reflection of each and every employee’s efforts to improve fiscal prudence and responsible budget management.
Contact: Matt Ross, Public Information. (505) 955-6045, [bot protected email address].