Mod: I did a kind of impromptu interview with City Manager Gabe Engeland about this surprising development. Here is how that all went.
Tattler: Question that just popped up on my blog: ".22c out of every water dollar goes to debt. That is now. What happens when the bond payments double in 2020?"
City Manager Engeland: The 2002 Bond payments increase in 2019-2020, but the 1998 Bond payment is retired the same year. In 2019 payment of all debt in the Water Fund will be $846,720. In 2020 payment of all debt in the Water Fund will be $663,190. We actually will lower the overall debt burden in the Water Fund when the payments on the 2002 bond ratchet up. However, because of the way the 2002 bond was structured, this debt will eat up a larger portion of operating revenue even as the total payments decrease—and this is after the interest only portion is complete. If we are successful in the restructuring of the debt we can avoid some of this, but we won’t be able to avoid all of it.
Tattler: Does Sierra Madre's low Moody's bond rating play any role in this refinancing? I have been told this will make it more difficult.
City Manager Engeland: The bond rating will be a factor in the restructuring process along with other items, like reserves, operating revenues, customer base, etc. The market will determine our creditworthiness and the current rating will be one of the first things it considers. The bond rating is actually somewhere in the “A” range right now (I forget the exact rating) and the outlook has moved to “stable.” Previously the bond rating was in the “B” range and the outlook was negative. Both of these are improvements over the past and are due in large part to the work our Assistant City Manager has done on this bond issuance. She’s fantastic. The rating essentially means we have the ability to meet our commitment but we may be influenced by changes in economic conditions or other circumstances.
Tattler: That is good news. The last Moody's notice I saw was in 2015 and had the bonds rated at Ba1. Maybe Moody's can send out an update? They're usually not that shy. It could be received as a big win in town.
City Manager Engeland: We’re on the same page. We contacted them a few days ago to send the official letter. What they initially sent was the “rating history” which showed the improvement. It’s odd they didn’t send a formal letter when it happened.
Mod: But wait, there's more! S&P isn't the only bond rater that has upped Sierra Madre's from somewhere in the junk realm to an "A". Which, by the way, isn't the best of all possible ratings, but certainly is much better than where it was in 2015. This piece of happening news comes to us from something that calls itself EMMA, which stands for "Electronic Municipal Market Access." It shows that both Moody's and KBRA (Kroll Bond Rating Agency, Inc.) are also piling on the wild joy as well. None are quite as high as they could be, but certainly this is a vast improvement.
Mod: Link to EMMA here. More news as it arrives.