Vicksburg on strong financial base
Published 6:39 pm Tuesday, June 26, 2018
Vicksburg got some good news last week when Moody’s Investment Services, a New York-based provider of credit ratings and risk analysis, retained the city’s A2 bond rating.
The rating was the result of Moody’s research into the city’s finances as part of the Board of Mayor and Aldermen’s application to borrow up to $23 million in general obligation bonds for the sports complex. City officials are expected go to the bond market sometime this week to sell the bonds, which will be used to pay the lease on the complex when it is completed, and will be paid with the revenue from the city’s special 2 percent sales tax on restaurant food and beverage sales and hotel room rentals. And an A2 rating means the city has more than a sufficient financial ability to pay off the loan.
Mayor George Flaggs Jr. last week put the bond rating in simple terms. “It’s kind of like your credit score; you score good, the cheaper you can borrow money,” he said.
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But it’s more than that.
Bond ratings are used to determine a borrower’s ability to pay off a loan or bond issue. It is also a statement of how strong the city’s finances are. When a city files for a bond rating, it is required to provide continuous financial information, such as audit reports, to the rating service that are used to determine if the city will keep its rating, which can go from AAA to C, with AAA being the highest and best rating and C the lowest. Moody’s rating service also has a “WR” designation, which means the rating has been withdrawn.
If a city loses its bond rating, it must reapply and risk getting a lower bond rating than it previously had and also risk paying a higher interest rate when it enters the bond market to borrow money.
That happened to Vicksburg in 2012, when Moody’s pulled the city’s A bond rating for failure to provide current audit reports. The rating was restored in late 2013, after the audit reports were brought up to date.
The city’s strong bond rating means that not only will it be able to borrow money in the future, but the fiscally responsible decisions made by the Board of Mayor and Aldermen have put Vicksburg on a strong financial base.