At the April 1 meeting of the Preston City Council, City Administrator Joe Hoffman cited reasons for the recent S&P Global bond rating of AA-/Stable for the city.
This is a downgrade from an AA rating received by the city in 2013. That year the city was upgraded from AA- to AA. One reason for the downgrade is the city’s reserves have decreased as a percentage of expenditures. Hoffman questioned if the ratings agency would see this differently if funds set aside for capital expenditures were held in the general fund, increasing the amount held in that fund.
The second reason given for the downgrade was below average wealth and income levels. There was concern related to the median income and jobs in the local/rural economy. Preston’s economy was determined to be weak.
The city’s strong budgetary performance and flexibility was noted. Financial management practices were standard and are now considered good. The debt profile is weak.
Hoffman estimated the AA rating which was in place when the city bonded for the 2014 project saved the city $40,000 to $50,000. The higher rating saved the city .15% to .2% of interest on the bond. This downgrade will cost the city the next time it borrows money in slightly increased interest payments. Hoffman explained if the city borrows $2 million for a street project in 2020, we could expect to pay an additional $1,500 per year of interest due to the downgrade.
A lot of neighboring cities and the county also have an AA- rating.
Councilman Robert Maust insisted the city should appeal or get another rating (Moody’s and Fitch also are rating agencies). Hoffman said he feels the ratings agency has moved the goal posts, as they are calculating the city’s reserves in a different way. Maust suggested Mike Bubany, the city’s financial advisor, attend a future city council meeting to discuss options.
Mayor Kurt Reicks asked Hoffman to check with Bubany about any options the city may have.
Other business in brief
•The application for the veterans home in Preston is now in the federal queue.
•Approval was given to close accounts 358 and 361, as the bonds have been paid in full. The total left in the two accounts is about $134,224. The funds will be transferred to the general fund. These funds have been allocated to the veterans home cash and land donations.
•There were four applications for the summer help position. Ian Shupe was hired as the summer helper.
•Friday, April 26 was proclaimed to be Arbor Day and the month of May is Arbor Month. Jim Bakken said Preston is a Tree City USA member. The city will hold a tree planting on April 26 at 10 a.m.
•Approval was given for a quarter page “thank you” ad for those who volunteer for the city. The ad costs $152.
•The purchase of 25 tons of salt on the state contract was approved for the 2019/2020 season. In 2018 the city purchased 23.4 tons of salt costing a total of $1,645.02.
•Approval was given of an agreement with Curve Solutions to develop a promotional video at a cost of $5,800. The Preston EDA gathered the funding for the branding and housing development promotional work. The goals of the videos are to get people to move to Preston and to encourage developers to invest in Preston.
•The next city council meeting is scheduled for Wednesday, April 17.
Leave a Reply