New bond rating gives Dunedin more financial flexibility, lower borrowing costs
DUNEDIN -- New stormwater and capital improvement projects could start popping up around town thanks to a recent improvement in the city's bond rating.
The new bond rating - local government's version of a credit score - is the result of improved findings handed down by the Big Three national bond-rating agencies, said Dunedin finance director Jeff Yates. The companies measure cities' financial stability and creditworthiness, similar to the way credit reporting agencies assign credit scores to individuals.
A better credit rating brings lower interest rates on loans, which means Dunedin can afford to borrow more money and stretch out those payments over longer periods of time.
"We can either do more projects or not have to raise the utility rates," Yates said.
The agencies released Dunedin's new ratings in May, and already, Yates said, Dunedin has used the information to refinance past loans on a long list of water/wastewater and stormwater utility projects.
The new lines of credit are expected to save water/wastewater ratepayers $1.43 million during the life of the loans. The refinancing is anticipated to save stormwater ratepayers $290,000.
Yates said Dunedin has also used its upgraded status to obtain interest rates of less than 3 percent on two new loans:
- A $5.9 million, 20-year stormwater utility loan, a portion of which will go toward completing the Orangewood Outfall project. That project is aimed at relieving chronic flooding and improving water quality in south Dunedin through stormwater pipe improvements.
- A $17.9 million water/wastewater loan. Some of that will be used to complete a replacement of an early 1960s drinking water line along the Dunedin Causeway.
Yates said the new rating will also translate into savings down the road on other anticipated projects, including stormwater drainage improvements at President Street and renovation of the city's water and wastewater treatment plants.
The finance director said the Big Three bond rating agencies earlier this year analyzed Dunedin's financial standing during two grueling days of presentations and followup meetings in New York.
It was the first time the city had been rated since 2007. The stormwater and water/wastewater utilities, which were once a single entity, were rated separately for the first time.
Moody's Investors Service upgraded Dunedin's bond rating from Aa3 to Aa2. The agency rated the water and wastewater utility as A1 stable and the stormwater utility as Aa3.
Standard & Poor's gave the overall city an AA- rating, and rated the water and wastewater utility as AA- stable, and the stormwater utility as AA.
Fitch rated the stormwater utility as AA-.
The ratings indicate that Dunedin has a strong capacity to meet its financial commitments, carries the lowest level of credit risk and differs very little from an organization with a top rating of AAA.
Yates credited the City Commission with "having the foresight" to urge city staff to pursue the new designation.
"The ratings agencies recognized the city's commitment to infrastructure, as well as how the city has been managed during these economically challenging times," Mayor Dave Eggers said in a statement. "The savings from refinancing will help to maintain low rates for the residents and continue our infrastructure programs.
--Keyonna Summers, Times Staff Writer