The most widely read story in the last week on the Rivard Report was our interview with Mayor Ivy Taylor. Our posting one day later that debunked talk of the Oakland Raiders coming to San Antonio finished a close second. A report on the City of San Antonio receiving a AAA bond and credit rating with all three major rating agencies for the fifth consecutive year finished so far down the readership list I didn’t even count its place. (This is based on numbers I checked Sunday night, Aug. 3.)
People generally love stories that rank San Antonio high among other U.S. metro areas, and dislike stories that remind us of our shortcomings. A story about the city becoming a top destination for college-educated Millennials draws big traffic. A story about San Antonio’s obesity problem putting the city near the top of another kind of list is a turn off.
San Antonio is the only U.S. city with a population of more than one million people with a AAA bond rating. Yet nobody’s dancing in the streets.
Asking people to read about public finance is like asking them to clean their garage or clean off their desks at work. People would rather do just about anything else, thank you. Reporters are the same way. I could be wrong, but a quick check last week indicated the AAA credit rating announcement attracted little media attention. It’s hard to compete with stories about an NFL franchise kicking our tires, or officials pulling the plug on the streetcar project.
Yet how well or how poorly city leaders manage the public’s money matters enormously. Many of us have to work hard to understand finances. One of the many things we do not learn in school, unfortunately, is to how to manage money. Finance is easier to understand, of course, if we talk about our own wallets and bank accounts: How would you like to save thousands of dollars on your home mortgage simply by refinancing your loan at a lower interest rate? Yes, please!
City officials announced Monday the sale of $233 million in bonds last week at a combined interest rate of 2.83 percent. The money will be used to pay for projects approved by voters in the May 2012 $596 million bond election. Streetcar opponents take note: $337.44 million, or 57 percent of the total bond package, is being spent on streets, drainage and sidewalks, and the majority of those projects lie outside the center city. The City also refinanced $72.5 million in existing bonds and certificates of obligation at a 1.68 percent interest rate.
When the City sells bonds, it basically is going into the open bond market and inviting institutional and individual investors to buy low-risk, low-return municipal bonds. Last week’s successful sale points to the obvious: There is no shortage of investors willing to invest in San Antonio because of our strong credit rating. The return on investment might not be high, but it’s better than a certificate of deposit or money market account at your local bank and it’s a very safe bet.
The refinancing alone will save taxpayers $6.7 million, according to city officials, money that can then be spent on other basic service projects.
“For any citizen who has heard about the City’s ‘AAA’ bond rating and wondered why it matters, it doesn’t get any clearer than this,” City Manager Sheryl Sculley said in prepared statement. “By keeping our financial house in order, we are able to borrow at much lower interest rates, which translates into lower total costs for the streets, drainage, libraries, parks and other projects that the community wants.”
Timing is everything. One week ago, the City gets its Triple A credit rating renewed. It immediately goes out into the bond market and raises capital at preferential interest rates. This week Sculley goes before the City Council and newly elected Mayor Taylor and presents the 2015 Proposed Budget. Why is this all connected? One reason that Standard & Poor’s, Moody’s and Fisk all give San Antonio the AAA rating is because the City has shown that as elected leaders come and go, fiscal discipline will be maintained, regardless of who happens to be in office in any given year. Citizens take that for granted, but other cities have spent money they do not have, borrowed money they cannot repay on time, or promised to fulfill pension obligations they cannot fund, and the result is a drop in credit rating, or worse, default.
“It takes financial discipline and often difficult decision making to maintain a ‘AAA’ bond rating,” said Mayor Ivy Taylor in the same prepared statement. “But these are the rewards we reap: low-interest rates and millions of dollars in savings that can be used to invest in future projects to improve our community.”
Winning Council support for the annual budget is key to San Antonio staying at the top of the “Big Cities With Great Credit Ratings” list.
*Featured/top image: View of downtown San Antonio from UTSA’s Downtown Campus. Courtesy photo.