Moody’s upgrades Covington for 2nd time in two years
(EDITOR’S NOTE: This release has been edited to add a link to the official credit opinion, which was distributed May 14.)
COVINGTON, Ky. - Moody’s Investors Service today upgraded the City of Covington’s credit rating for the second time in two years and also gave the City a “positive outlook” going forward - decisions that could save taxpayers millions of dollars in the coming years as the City looks to borrow.
The upgrade moves the underlying rating on the City’s outstanding rated general obligation bonds from A2 to A1. In March 2019, that rating had moved from A3 to A2.
“The upgrade to A1 reflects the material improvement in the City’s financial position supported by conservative budgeting practices, strong fiscal policies, tax base growth, and enhanced expenditure controls,” Moody’s said in its release from New York today.
“The positive outlook reflects our expectation that the City will maintain its cash and reserve levels at or above current levels, adhering to formalized policies to ensure the City’s operational sustainability, and closely manage expenditures,” it also said.
City officials were ecstatic and said the upgrade would both boost the City’s reputation in the financial and economic communities and save taxpayers millions of dollars.
“When Moody’s speaks, everybody listens,” Finance Director Muhammed Owusu said. “To jump two grades in two years is just phenomenal. This is the wider financial market affirming that the City of Covington is on firm financial footing and is following the correct financial path.”
Added Owusu: “When the City borrows money by issuing bonds to buy the 23-acre IRS site from the federal government later this year, the improved bond rating will save millions of dollars in financing costs over the life of that bond issue. It’s unbelievable in terms of actual dollars saved for taxpayers going forward.”
Owusu noted that the A1 rating is higher than the average of most local governments across the United States. He also noted that the City had a good chance of being upgraded again in the coming years if it continues on the same financial trajectory it’s on now.
To see the press release distributed in New York today by Moody’s, click HERE. To see the official credit opinion, click HERE.
The higher rating also strengthens Covington’s ability to recruit new businesses and jobs, given that most investors “want to move to a community that is financially stable, strategic, and disciplined,” Economic Director Tom West said. “Additional guidance from Moody’s will help the City continue to improve our rating by expanding our tax base and addressing our poverty rate.”
Much of a credit rating score is based on hard economic and financial numbers, but rating agencies also consider strategic leadership decisions.
In their presentation to Moody’s last month, City leaders touted an array of business and finance improvements, including:
- Increased vibrancy in the urban core, a business-friendly atmosphere at City Hall, a renewed focus on data analytics in City decisions, an economic “building boom” throughout the City, and smarter use of economic development incentives to emphasize return on investment to taxpayers.
- A growing budget fund balance, a reduction in debt, and adoption of a wide range of formal policies approved by the Board of Commissioners, including a new debt management policy, a stronger fund balance policy, an Accounting Policies and Procedures Manual, and a financial management ordinance.
“This all reflects an increased awareness that no decision should be made in a vacuum,” Covington City Manager David Johnston said. “Our economic development strategy, our financial stability, our budget and its ability to pay for the high-level services - all those things are intertwined.”
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