Renton now has the highest financial rating a city can achieve.
The city received a AAA rating on long-term bonds from Standard & Poor’s Global Ratings, which they announced in a press release and at the council retreat March 9.
Because of the security of the bonds new rating, buyers might be willing to take lower interest rates, which saves money on city bond payments over time. Jan Hawn, Renton’s administrative services administrator, said this would result in lower costs for taxpayers.
Cost reduction is contingent on the market and the buyer of those bonds, Hawn said, so there’s no certain numbers on how much this could save.
The city also said this will free up funding for important municipal infrastructure projects, according to the press release.
The rating was related to money management, available debt capacity and reserves. Dept capacity and reserves were also discussed at the council retreat March 9.
“We’re very pleased with this high AAA rating,” said Mayor Denis Law in a press release. “S&P’s rating is a reflection of how we have managed our money, strengthened our reserves, and found solutions to challenges that affect the city budget.”
Hawn said the cities policies are conservative in terms of adequate reserves in times of recessions or cash flow purposes, which helps place them in a better position.
The city has over doubled its amount for the general fund reserves since 2015, with $46.8 million in December, 2018, according to retreat documents. Reserve funds are at or over their policy target.
At the retreat, administrators and council discussed the city’s debt capacity and high liquidity.
In total, Renton has a little over $75 million in outstanding debt, both city bonds and outside bonds. Outside bonds include Fire District 40 and Renton’s 36 percent payment of the debt service to SCORE jail.
But that’s a little under 16 percent of the city’s capacity for debt, meaning they have the ability to use much more. This, plus the high reserves, gives the city financial flexibility that helped achieve this rating.
“We have very little debt capacity compared to what we could use,” Hawn said. “Even with the addition (of the 2019 bonds).”
Renton’s economy was praised by S&P Global in its summary of the updated rating. In the document, Southport and Boeing were highlighted, as well as 81 percent increased property values since 2013.
“We think (Southport) could help the city attract higher-income residents and multifamily development by changing the city’s image from one anchored in industry and suburban living,” S&P Global states in the report.
It also highlighted Renton’s strong management with monthly fiscal updates to city council and the building of biennial budgets.
S&P Global did note the end of the annexation tax credit that Renton previously received from the state, and the choice to use one-time reserves in absence of that credit. The city also informed S&P Global, according to that summary, that the city is unlikely to pursue annexations in the near future.
The rating summary states this is both a good move while opening up the possibility of the city’s budget to now be more economically sensitive. The S&P estimated they would only lower the rating in the future in the event of a recession-led downturn.
Aside from unexpected circumstances, S&P Global also noted in its rating report that the city is unlikely to add to debt anytime soon aside from the 2019 bonds.
“We anticipate the city’s debt issuances, should they occur, will be modest during the next five years,” according to the report.
Hawn said S&P Global had been planning to come rate the city — their last visit was to rate the 2015 bonds.