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For the second time in 2010, a national credit rating agency has affirmed an improved bond rating for the City of South Bend.
Fitch Ratings recently affirmed an AA+ rating on four bonds issued by the City of South Bend’s Redevelopment Authority and revised the City’s rating outlook from negative to stable. (In February, the Standard & Poor’s bond rating service upgraded the City’s bond rating to AA- from A+.)
“The Outlook revision to Stable from Negative is based upon the City’s prudent response to the challenges presented by the recently implemented, statewide ‘Circuit Breaker’ legislation and its maintenance of sound financial operations despite the dramatic drop in property tax revenues triggered by the law,” according to a statement released by Fitch Ratings. “The City has relied upon a mix of expenditure cuts, along with an increase in various income taxes, to compensate for the revenue shortfall.”
Fitch Ratings also noted that “maintenance of the City’s ample General Fund reserves, despite the challenging revenue environment, is key to the City’s rating.”
Other identified factors included “tightened expenditure controls,” “well-maintained” financial operations, diverse employment and tax bases, and projected tax revenue that is sufficient to replace lost property taxes.
The improved bond rating, coupled with a more favorable debt financing market compared with the original issue date, will result in a lower cost for the City to borrow, according to City Controller Gregg Zientara.
“The rise to an AA+ rating is a reflection of the City’s creditworthiness as well as strong management practices that have led to improved financial performance and position,” Zientara said. “The financial stewardship under the direction of Mayor Steve Luecke, together with the financial policies practiced by the City over the last several years, have placed South Bend in a strong financial position, which has led directly to two, successive improved bond ratings.”
The rating upgrade came as the City of South Bend refinanced four bonds, which were examined by Fitch Ratings:
• $1.245 million South Bend Central Development Area public improvement project lease rental refunding bonds series 1996A.
• $2.315 million Blackthorn Golf Course project lease rental revenue refunding bond series 1998.
• $9.39 million College Football Hall of Fame project lease rental revenue refunding bond series 2000.
• $6.76 million Morris Performing Arts Center lease rental revenue refunding bond series 2009.
Fitch Ratings is an international credit rating agency with headquarters in New York City and London. It is one of the three nationally recognized statistical rating organizations recognized by the U.S. Securities and Exchange Commission, together with Moody’s and Standard and Poor’s. Fitch Ratings’ long-term credit ratings are assigned on an alphabetic scale from ‘AAA’ to ‘D.’ The system was first introduced in 1924 and later adopted and licensed by Standard and Poor’s.