Recent bond ratings show Atlanta and Georgia on stable financial footing
By David Pendered
The economic outlook in metro Atlanta and Georgia appears to be getting brighter, according to several recent credit ratings issued by bond rating agencies.
None of the ratings say the economy is rosy. Just that the walls have held and things aren’t getting beyond control, as is the case in some other parts of the country.
The latest news came in a June 29 bond rating of $396 million in general obligation for Atlanta. Moody’s Investors Services raised its outlook, citing the city’s financial management and role as the hub of a regional trade and transportation hub.
The rating comes a month after Fitch Ratings confirmed its AAA and stable outlook for the state of Georgia. Fitch cited Georgia’s historic growth rates of the economy, low debt and conservative fiscal management.
These upgrades follow solid ratings on bonds relating to Atlanta’s airport.
In May, Moody’s upgraded its outlook to positive from stable on $222 million in bonds used to finance construction of the rental car facility. Moody’s said it based the uptick in part on the forecasted growth in passenger volumes at Hartsfield Jackson Atlanta International Airport.
In April, Moody’s assigned an investment-grade rating and stable outlook to some $492 million in bonds the airport was taking to market. The report cited overall trends for rising passenger volumes.
One dim observation came in March from Fitch Ratings.
Atlanta’s struggling office properties helped drag down the nationwide outlook for commercial mortgage backed securities. Vacancy rates continue at record levels and office space remains a buyer’s market.
According to Fitch: “A staggering 37 percent of all Atlanta office properties in Fitch-rated deals are now delinquent.”
But that is far from the doom-and-gloom facing the state of Illinois.
Moody’s in January downgraded its rating for Illinois to the worst in the country, citing the state government’s failure to deal with problems ranging from “severe pension under-funding or to its chronic payment delays.”
When Fitch provided a AA+ rating to Illinois’ unemployment funds earlier this year, it specifically noted that “pledged revenues are deposited in a segregated account, separate and distinct from the funds of the state.”
Atlanta officials used last week’s rating from Moody’s to observe the steps taken to position the city’s finances.
“The Moody’s rating reflects the commitment of my administration to restore the city of Atlanta’s finances and put us on a solid fiscal foundation moving forward,” Mayor Kasim Reed said in a statement.
“Despite the economic challenges of the past several years, we have built the city’s reserves, worked with the Atlanta City Council to pass sound, balanced budgets; and invested wisely in public safety and young people,” the mayor said.
Here’s what Moody’s reported:
“The Aa2 general obligation rating reflects the city’s recently improved reserve position, the diversity and scope of the city’s mature economic base which, although impacted by the current recession, remains at the enter of a nationally-important trade and transportation hub, and further incorporates the city’s manageable debt burden with limited future borrowing plans.
“The revision of the outlook to stable from negatives reflects the city’s return to structural balance and resulting, significant improvement of its general fund balance, which is expected to remain satisfactory given management’s conservative budgeting practices and commitment to adhere to reserve targets,” the report stated.
Moody’s cited the following as Atlanta’s strengths:
- “Large and diverse economy centered in leading national hub for trade and transportation;
- “Recently improved reserve position;
- “Implementation of long-term financial planning;
- “Manageable debt burden.”
Moody’s cited the following as Atlanta’s challenges:
- “High foreclosure rate continues to limit tax base growth;
- “Large inter-fund receivables ($54 million in fiscal 2011 for sanitation and emergency telephone system);
- “Significant pension liability, albeit recently reduced due to reform.”
Moody’s said the following steps could raise the city’s rating:
- “Stabilization of reserves at current or increased levels;
- “Development of a plan to reduce the general fund’s large inter-fund receivables.”
Moody’s said the following could make the rating go down:
- “Decline in reserves due to structurally imbalanced operations or inter-fund receivables that prove to be illiquid;
- “Increased debt burden of TADs (tax allocation districts) to be self-supporting or increased capital needs.”