Phoenix city leaders this afternoon learned that Standard and Poor’s has adjusted the city’s bond rating, from AAA to AA+ with a stable outlook. With the adjustment, Phoenix’s bond rating remains the highest of the six largest U.S. cities.
According to Matt Reining of Standard and Poor’s, the agency’s adjustment of Phoenix’s rating “is directly attributable to S&P’s newly released, changed criteria.” The economy, including property values and other economic conditions, now makes up 30 percent of the S&P score. “If market values were to climb, that could improve Phoenix’s score,” he said.
S&P gave the City of Phoenix a “very strong,” the highest score possible, in the areas of budget flexibility, liquidity, and budget and financial management. The City of Phoenix also holds the second-highest credit rating with Moody’s, at Aa1.
The adjustment is the result of regularly scheduled S&P reviews. S&P also recently adjusted the ratings of Indianapolis, from AAA to AA; Omaha, from AAA to AA+; St. Louis County, from AAA to AA+; Des Moines, Iowa, from AAA to AA+; Glendale, Calif. from AAA to AA+, and Clark County, Nev. from AA+ to AA.
“Clearly it’s disappointing any time a bond rating is adjusted in this way,” said Acting City Manager Ed Zuercher. “S&P’s new criteria places great scoring emphasis on the one aspect of our economy that was hit the hardest during the Great Recession – property values.”
“I’m encouraged by the significant increases in property values Phoenix has experienced in the last few months, and will focus every day on maintaining and strengthening the city’s financial excellence,” he said.
According to Arizona State University’s W.P. Carey School of Business, for the 12-month period ending October 2013, median sale prices of single-family homes were up 27 percent; existing single-family home sales increased 29 percent; foreclosure starts on single-family and condo homes were down 50 percent; and completed foreclosures on single-family and condo homes were down 64 percent.
“I’m disappointed the new S& P criteria have affected Phoenix, but we still have the second-highest bond rating in the nation and earned the highest marks for budget flexibility and fiscal management. Working together, the City Council passed sweeping pension reforms and ended pension spiking, which will save taxpayers $829 million over the next 25 years. And during my time as Mayor, the City will continue to retire its debt and maintain sound fiscal policy. We’ll continue to work together to improve our economy, create good jobs and lead Phoenix through the lingering impact of the Great Recession,” said Mayor Greg Stanton.
“As chairman of the Finance, Efficiency and Economy Subcommittee, I am laser focused on improving Phoenix’s economy and implementing strong financial fundamentals in our city. While this news is disappointing, I am confident that as the economy continues to recover, we will regain the AAA rating we had,” said Vice Mayor Bill Gates.
Through careful financial management, Phoenix has:
– recovered from a $277 million deficit just four years ago;
– restored and added critical services that were cut during the economic downturn;
– issued no new general obligation (GO) bonds since mid-2012 and has no plans to issue any in the near future;
– saved $91 million through efficiency efforts over the last four years;
– experienced a retail sales tax revenue increase of 8 percent for the first quarter of 2013-14, when compared to same time period last year.