The city of Richmond got some good news Friday that was released to the public Monday morning.
Prior to Richmond Utilities offering of $5.7 million in bonds to replace others sold at higher interest rates, Moody’s Investors Service upgraded the city’s credit rating to Aa3 from A3.
The service’s best rating is Aaa, followed by Aa and A. The scale continues in similar format through C. Each lettered category also has three numbered steps, with 3 being the lowest. Going from A3 to Aa3 represents a full-category jump.
Obligations rated Aa “are judged to be of high quality and are subject to very low credit risk,” according to Moody’s website.
The rating affects Richmond’s total debt of $13.7 million, according to the message Moody’s sent Friday morning to City Hall.
“The upgrade to Aa3 reflects the city’s improved financial position following restoration of balanced operations,” it stated.
The rating also takes into consideration the city’s modestly-sized tax base, below-average socioeconomic profile and minimal debt, which is financed at average rates, the statement noted.
The upgraded credit rating should allow Richmond Utilities to get an even better interest rate than it previously hoped on the bond sale, Mayor Jim Barnes said.
In just a little more than two years, the city has gone from running consecutive deficits to two years of surplus, the mayor told the Richmond AARP on Monday in a “state of the city” address.
Although the city has accumulated a $7.5 million reserve, Barnes said he thought another year would have been needed for the city’s credit rating to improve.
When he took office in January 2011, Barnes said the city took out a $1 million line of credit just to ensure it could meet its payroll and pay bills on time. The credit line wasn’t needed, but the contrast with the city’s financial outlook a little more than two years later was a credit to the stewardship of City Manager Jimmy Howard and the commissioners who came into office with him, the mayor said.
Some difficult, unpopular actions had to be taken to turn city finances around, Barnes said.
“We took a lot of criticism for some of our decisions, but I stand by those decisions,” he said.
While the city has reduced its number of employees, no mandatory layoffs were made, Barnes noted.
Fire Station No. 5 in the industrial park off Duncannon Road was closed, but the mayor said that should save the about $1.2 million a year.
“That’s not something we wanted to do,” the mayor said of the closing. It wasn’t popular “because everybody wants a fire station on every corner,” he said.
From 2007 to 2009, the city opened two fire stations for a total of five, and that could not be sustained financially, Barnes said.
For the current fiscal year, the city budget projected a surplus of $1.8 million, the mayor said. And for a while, officials thought the surplus could be even higher, at $2.9 million, he said. But now, the original projection may be the best that can be expected, Barnes said.
Even in the aftermath of the recession that began in 2008, city revenues have held steady, Barnes said. But with no growth in revenue and the prospect that it could decline, the city must still try to contain expenses.
With Eastern Kentucky University looking to reduce its budget by 10 percent, including laying off some employees, Richmond cannot expect revenue to grow.
About half of city revenue comes from the payroll tax, and much of that is paid by EKU employees, he said.
Although Richmond and Madison County will benefit from a surge of economic activity as the chemical-weapons destruction plant goes into operation, the long-term outlook for conventional operations at the Blue Grass Army Depot is questionable, the mayor said.
With the federal government being forced to reduce its spending, including defense spending, and with foreign wars winding down, there is no assurance the depot will survive the next round of base closings.
While local governments and chambers of commerce are working on a plan to promote economic development with the infrastructure that will remain after the chemical weapons plant is closed, replacing all the jobs from the plant and the depot will not be easy.
Late this month, the city hopes to let a contract on the Water Street Storm Water Project, the mayor said. Work could start in late April and be finished by November, if all goes well. The $4 million project is funded by a grant from the Federal Emergency Management Agency.
Bill Robinson can be reached at firstname.lastname@example.org or at 624-6690.
CIty of Richmond
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