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Credit agencies find much to like at Tampa City Hall, but are watching Community Investment Tax

TAMPA — Mayor Bob Buckhorn loves to talk about the city's credit rating, and who could blame him?

Twelve times since he became mayor in 2011, the big three credit rating agencies have raised their grades on either the city's general credit rating or various pieces of city debt.

Each upgrade reflects a good opinion of the city's finances, management and fiscal policies. Each makes borrowing money from the bond market a little cheaper.

"I'm pretty proud of that," Buckhorn says, especially considering how his administration has started every budget cycle with a projected shortfall between rising expenses and revenues still recovering from their collapse during the Great Recession. "It's a reflection of how conservatively we budget."

Last week, the city put out a news release touting its four latest upgrades from Fitch Ratings, including one that boosted its general credit rating to AA+, just one notch below the highest possible rating for municipalities.

But along with that rosy bouquet of upgrades, City Hall also recently was handed two plain daisies — a new pair of ratings on Tampa's Community Investment Tax bonds that are considered good, but not as good as before.

The downgrades came from Moody's Investor Services and Standard & Poor's. In detailed reports, each gave the same reason for the change: The city plans to borrow more money to be repaid by the Community Investment Tax.

City Hall is getting ready to go to the bond market and borrow an estimated $50 million to pay for a variety of projects, including the redevelopment of Julian B. Lane Riverfront Park, the construction of a new Fire Station No. 23 in New Tampa, some new Tampa Fire Rescue vehicles and some of the new drainage projects that the City Council approved last week.

The city will repay those bonds using the next 10 years' of revenue from the Community Investment Tax — a half-cent sales tax that voters approved in 1996 to pay for the Tampa Bay Buccaneers' stadium, schools, roads and other capital projects.

The credit-rating agencies want to see that the tax revenues will be more than enough to cover the maximum annual debt payments on those bonds. Once the city takes on another $50 million in debt, the coverage is expected to fall to about half what it had been.

That, Standard & Poor's said in its analysis, is a level of coverage "we still consider good."

But it will make the debt a little more expensive. The city plans to seek competitive bids for the bond issue in mid-September.

Borrowing an estimated $50 million for its projects, the city expects to pay — based on current market rates — an estimated $14.6 million in interest over the 10-year repayment period, according to city chief financial officer Sonya Little.

Of that, officials estimate from $67,000 to $100,000 in interest costs can be attributed to the recent downgrades on the Community Investment Tax bonds.

While proud of his city's credit upgrades, Buckhorn accepts the two downgrades as a necessary trade-off for getting some important projects done.

"The most important thing for us is always our general credit," he said. "We recognize that Julian B. Lane is a big project. It's going to require a significant investment of CIT dollars."

Buckhorn sees the downgrades as the rating agencies' way of saying "let's keep this on our radar."

"I'm fine with that," he said. "I don't have any doubt about the certainty of the CIT. … It think it's a wise investment, and I think it's a prudent investment."

Contact Richard Danielson at rdanielson@tampabay.com or (813) 226-3403. Follow @Danielson_Times

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