November 25, 2010
Omaha taxpayers will save nearly 6 million dollars because of the Suttle Administration’s strong fiscal management which led to reinforced AAA bond ratings and lower interest rates. The City of Omaha has issued new bonds as well as refinanced existing bonds at historically low interest rates. The City refinanced $35.9 million in bonds at a rate of 2.72% with an average term of 7.742 years, saving the City $3.486 million from refunding. Omaha will also save approximately $2.5 million over the next five years in new general obligation bonds due to the continuation of its AAA bond rating.
As a result of Mayor Suttle’s fiscal stability measures Moody’s reinforced the City of Omaha’s AAA bond rating in October 2010. The 2010 Moody’s report specifically stated, “the rating actions reflect the City’s lean, but adequate financial position bolstered by revenue enhancements made in Fiscal 2010 and 2011″ by Mayor Suttle, “and the City’s commencement of managing its long term pension and other post-employment benefit liabilities.” The millions in taxpayer savings reaffirms the prudence of the Suttle Administration’s strong fiscal management and clearly demonstrates how the City’s AAA bond rating will create additional savings in the long-term.
The City of Omaha has a total bonded debt outstanding of almost $1.1 billions, 575.8 million which is general obligation indebtedness backed by the full faith and credit of the city. On an annual basis, the City issues approximately $20 million of general obligation bonds. Moreover, an unfunded federal mandate relating to the combined sewer overflow project means the city will be responsible for $1.5-$2.0 billion over the next twenty years. Existing debt levels along with projected future issuances make favorable bond ratings critical to the financial stability of the City.
A city’s bonds are evaluated by national credit agencies and assigned a credit rating investors rely on in determining how much they are willing to lend to the city, and based on the perceived risk, how much interest they are willing to accept to compensate them for that perceived risk. On October 16, 2008, Moody’s Investors Service downgraded the City of Omaha’s general obligation bonds from AAA to Aa1. In its report, Moody’s pointed to the City’s overall debt burden, unfunded pension liabilities, and overreliance on sales tax receipts as the basis for the decline in rating.
“Recognizing the potential negative impact the rating downgrades were having on the City’s financial stability, I have worked hard for the past year and a half to correct the deficiencies noted in the 2008 Moody’s report,” said Mayor Suttle. Specifically, Mayor Suttle’s plan for fiscal stability included: passage of a police contract which restores actuarial balance to the City’s unfunded pension liabilities, reduction of the City’s reliance on sales tax receipts, increased efficiencies coupled with decreased spending, as well as the adoption of an ordinance requiring a ten-year plan to set aside cash reserves commensurate with other AAA-rated cities.
Read the Moody’s and Standard & Poor’s Reports.
