CONTACT: Laura E. Mayes, 210-207-1337
Spanish media: Carlos Valenzuela, 210-207-3919
SAN ANTONIO (July 31, 2019) — The City of San Antonio’s credit ratings were reaffirmed by all three major rating agencies, citing the City’s “very strong management with strong financial policies and practices” among other achievements. The City has achieved a ‘AAA’ general obligation bond rating by Standard & Poor’s (S&P) and Moody’s Investors Service (Moody’s) for the tenth consecutive year. Fitch Ratings has also affirmed their ‘AA+’ rating.
“I’m proud to continue San Antonio’s leadership as one of the best managed cities in the nation, despite the new financial constraints we are facing,” said City Manager Erik Walsh. “The reaffirmation of our ratings reflects our strong fiscal policies, good governance and careful management of the City’s budget.”
San Antonio’s bond ratings are among the highest of any major city in the United States. The ratings enable the City to borrow at the lowest-possible interest rates, which save millions of dollars for residents each year. The savings allow the City to invest more in street construction, sidewalks, drainage improvements and other major bond projects.
The reaffirmation of the City’s credit ratings come despite recent financial challenges San Antonio faces due in large part to the State Legislature’s elimination of fees paid by cable and telecommunications companies, expected impacts from the revenue caps bill-known as SB2 and other fiscal constraints. The City has responded to these challenges by updating its financial policies with the City Council, which will include an annual review of the impact of revenue caps with a recommendation on the property tax rate, annual review of property tax relief with focus on homeowners and annual review of fees and charges.
“We have maintained our strong ratings by staying nimble and prepared to address any challenges that come our way,” said Mayor Ron Nirenberg. “Voters reaffirmed their support for the City’s prudent fiscal stewardship of their tax dollars this spring by sticking with an approach centered on sound investment.”
City Manager Walsh and City staff met with Fitch Ratings, Moody’s and S&P earlier this month in anticipation of the City’s sale of approximately $461.9 million in general obligation bonds, certificates of obligation and tax notes in August. The sale will include the third issuance of the voter-approved 2017-2022 Bond Program and will include a refunding component for interest cost savings, which is expected to save the San Antonio taxpayers $13.8 million on a present value basis.
In December 2018, Fitch downgraded its bond rating of the City of San Antonio one notch from a ‘AAA’ to a ‘AA+.’ The downgrade was a direct result of the passage of Propositions B and C, which were submitted by the fire union and amended the City’s Charter in November 2018. Earlier this month, the fire union unilaterally invoked their right to binding arbitration, per the terms of Proposition C. The arbitration panel is expected to reach a collective bargaining agreement decision later this year. The panel’s decision is binding and will not be voted on by fire union membership nor the City Council. All three agencies indicated that among the factors they will consider for future ratings is the outcome of binding arbitration with the fire union.
Below are some of the comments from the rating agencies’ reports:
S&P noted “the rating reflects our view of San Antonio’s strong economy and a history of strong budgetary performance and very strong reserves.” S&P also stated that “the rating reflects our opinion of the City’s strong economy with access to a broad and diverse metropolitan statistical area and a local stabilizing institutional influence; very strong management with strong financial policies and practices; strong budgetary performance with operating surpluses in the general fund; very strong budgetary flexibility; and very strong liquidity.”
Moody’s cited that “the ‘AAA’ rating is supported by a growing and vibrant economy, anchored by dynamic sectors that have spurred stable employment trends. The city also benefits from a solid financial profile that benefits from steady operating performance and strong financial management practices.”
Moody’s specifically noted “the city demonstrates good governance guided by an experienced team. The city’s fiscal practices include multiyear budgeting, and five-year financial forecasting, with the capital planning going out further.” Moody’s also mentioned that their “stable outlook reflects the expectation that strong financial management practices and a growing local economy will continue to support stable credit fundamentals and keep long term liabilities manageable.”
Fitch stated “the ‘AA+’ rating reflects strong revenue growth prospects and superior financial resilience.”
Fitch noted that “the ‘AA+’ also reflects the city's diminished expenditure flexibility triggered by a 2018 voter-approved city charter amendment that permits firefighters to call for binding arbitration during collective bargaining agreement negotiations that result in an impasse…Even if the results of the current binding arbitration are favorable to the city, Fitch believes longer term workforce controls are materially weaker under a binding arbitration framework.”
The full reports from all three rating agencies can be viewed here: https://www.sanantonio.gov/Portals/0/Files/Finance/off-statements/Summer2019AgencyReports.pdf