Mayor’s Office

Moody's Investors Service Upgrades Burlington's Credit Rating Two Steps

FOR IMMEDIATE RELEASE

March 3, 2016
Contact:  Jennifer Kaulius
            
    802.324.2505

                              

Moody’s Investors Service Upgrades Burlington’s Credit Rating Two Steps
A3 rating is highest level since 2012, halfway back to pre-BT downgrades;
Cites prudent, balanced operations and fiscal responsibility

Burlington, VT – Moody’s Investors Service yesterday upgraded the City of Burlington’s credit rating two full steps to A3 with a stable outlook, returning the City of Burlington to an “A” rating. Of the six ratings steps that Burlington lost between July 2010 and June 2012 in the wake of Burlington Telecom’s financial struggles, three have now been restored in two upgrades over the last year (please scroll down to view Burlington ratings table). In its Credit Report, Moody’s indicated “The upgrade to the A3 rating reflects an improved financial position following three years of audited operating surpluses, as well as the city’s strength as the economic center of Vermont (Aaa stable).” Yesterday’s upgrade is projected to immediately result in approximately $450,000 of Net Present Value (NPV) savings for Burlington taxpayers on a debt refinancing transaction that will be completed in April, and will save Burlington taxpayers and ratepayers millions of additional dollars on interest over time whenever the City pursues necessary and prudent borrowing. 

“Today’s news is proof that the commitment of the community, the City Council, and the Administration to restore Burlington’s financial reputation is working. We are keeping dollars in Burlingtonians’ wallets, not wasting them on high interest payments,” said Mayor Miro Weinberger.  “While we have more to do in the years ahead to complete our financial turnaround, the fact that we have been able to make so much progress in a short time without service cuts or major tax increases is a tribute to the strength of the Burlington economy, the hard work and innovation of our management team, and the collaboration of our public employee unions.”

Moody’s decision to upgrade to A3 from Baa2 impacts the rating on $109 million of outstanding General Obligation Bond debt, and $7.8 million of outstanding Certificates of Participation debt. In the coming weeks, the City will refinance existing debt at a lower interest rate than previously possible.  Prior to the upgrade, the refinancing was expected to generate approximately $1.3 million in NPV savings for Burlington taxpayers and ratepayers. The transaction is now projected to result in more than $1.75 million in NPV savings. The NPV savings will be achieved without extending the maturity dates on the existing debt.
 

Highlights from the Moody's report include:

  • “The financial position continues to improve due to conservative budgeting and prudent expenditure management. Audited fiscal 2015 results reflect the third consecutive operating surplus.”
  • “The stable outlook reflects our expectation that management will maintain balanced operations and a satisfactory financial position, while managing increasing costs for salaries, employee benefits, and capital needs.”
  • “The city’s management team since 2012 continues to show commitment to addressing financial pressures with a sound approach and fiscal responsibility, which we expect will be aided by the recent adoption of a formal fund balance policy and ten-year capital plan.”
     

The actions that have contributed to this upgrade include:

  • Voter approval in November 2012 of the $9 million Fiscal Stability Bond;
  • Settlement of the $33.5 million Citibank lawsuit on terms favorable to Burlington taxpayers;
  • Conversion of a 2012 unassigned fund balance of negative $15 million into a 2015 surplus of over $4 million;
  • Elimination of multi-million dollar fund balance deficits in the Water and Sewer Enterprise Funds;
  • Improved financial operations at the Burlington International Airport and Burlington Electric Department;
  • Three years of operating surpluses;
  • Improved internal controls and financial management practices that have resulted in the reduction of negative audit findings from 27 in 2012 to four in 2015; and
  • The creation of a City Council Fund Balance policy and commitment to long-term infrastructure and capital asset planning.

     

  Moody's Ratings

Date

Action

Rating

Action

Outlook

03/02/16

Upgraded

A3

Revised

Stable

10/29/15

Affirmed

Baa2

Affirmed

Positive

03/03/15

Upgraded

Baa2

Revised

Positive

04/14/14

Affirmed

Baa3

Revised

Stable

08/20/13

Affirmed

Baa3

Affirmed

Negative

04/12/13

Affirmed

Baa3

Affirmed

Negative

09/20/12

Affirmed

Baa3

Affirmed

Negative

06/20/12

Downgraded

Baa3

Affirmed

Negative

03/08/12

Placed on Watchlist for Possible Downgrade

09/16/11

Affirmed

A3

Affirmed

Negative

01/07/11

Downgraded

A3

Affirmed

Negative

07/09/10

Downgraded

A2

Revised

Negative

03/09/10

Placed on Watchlist for Possible Downgrade

07/31/09

Affirmed

Aa3

Affirmed

Stable

04/09/09

Affirmed

Aa3

Affirmed

Stable

12/07/07

Affirmed

Aa3

Affirmed

Stable

09/22/06

Affirmed

Aa3

Affirmed

Stable

06/09/05

Affirmed

Aa3

Affirmed

Stable

 

Source: Moody’s Rating Reports

 

Global Long-Term Rating Scale
Rating Symbols and Definitions

Aaa

Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

Aa

Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

A

Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

Baa

Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

Ba

Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

B

Obligations rated B are considered speculative and are subject to high credit risk.

Caa

Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

Ca

Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

C

Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Source: Moody’s Investors Service Rating Symbols and Definitions, February 2016, https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004
 

*Please see the attached Moody’s Credit Report.

 

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Press Release Date: 
03/03/2016
City Department: 
Mayor's Office