Bond Rating Agency to Discuss Impact of Propositions with City Management

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City Manager Sheryl Sculley.

Bonnie Arbittier / Rivard Report

San Antonio has received the top bond rating from all three major bond rating agencies since 2008. City Manager Sheryl Sculley first was hired in 2005.

The City could be looking at a downgrade of its long-held, gold-star bond rating after the passage of two city charter amendments last week, according to a bond rating agency representative.

What would normally be a routine meeting between Fitch Ratings, one of the nation’s three largest bond rating agencies, and the City of San Antonio next month about finances, debt plans, and the economy also will address how these propositions impact the City’s management and financial flexibility, said Jose Acosta, a senior director at Fitch.

Voters approved Proposition B, which sets a term limit for future city managers and caps their annual pay at 10 times the lowest-paid, full-time city employee, and Proposition C, which gave the firefighters union the ability to declare an impasse in its contract negotiations with the City and force binding arbitration on a new labor deal.

“Proposition C is the most consequential in the near term,” according to a Fitch news release Wednesday. “Under the revised city charter, the unilateral ability for the union to call for binding arbitration before participating in any good-faith labor negotiations is likely to reduce the city’s ability to control its expenditures.”

Ratings are typically reviewed when an entity approaches the market to sell debt, such as a bond issue. The better the rating, the lower the interest rates. A rating decrease is associated with higher interest payments on debt.

When the time comes for a review, Fitch’s bond rating committee will decide what action to take: “an affirmation, or an upgrade, or a downgrade along with negative or positive outlooks,” Acosta told the Rivard Report.

Fitch is also wary of the possible impacts of Proposition B, Acosta said. Under the proposition, a future city manager would be paid roughly $300,000, compared to current City Manager Sheryl Sculley’s $475,000 salary and potential $100,000 bonus.

“Any savings they accrue [from the city manager’s salary] would be negligible compared to the city’s overall budget [of $2.8 billion],” the Fitch release said. “We’d be more concerned about the City’s ability to hire the most qualified person to run such a large city on that salary.”

City Manager Sheryl Sculley, who participates in all rating agency reviews, said the City will strive to keep its gold-star, AAA rating.

“I am sure Fitch will ask about overall revenue and expense picture for the city,” Sculley said. “We will do everything in our power to address their concerns and maintain our AAA rating.”

Fitch and Standard & Poor’s warned against a possible downgrade as the firefighters union’s campaign to get the propositions approved was gaining momentum this summer. Moody’s, another major agency, did not announce a similar warning.

“We each have our rating criteria that we abide by, so we do not coordinate or communicate with other rate agencies,” Acosta said. “The value of the rate agencies is that each one of us is independent.”

Representatives from Moody’s and S&P could not be reached in time for publication.

The meeting in December was scheduled because the City is trying to refinance a U.S. Housing and Urban Development loan, Sculley said.

Voters soundly rejected another proposed charter amendment, Proposition A, which could have lowered the threshold and expanded the scope for public votes that challenge City Council decisions.

“Fitch believed this charter amendment would have been consequential in its potential to greatly limit the city’s revenue and expenditure flexibility and interfere with management’s ability to operate the city,” according to Fitch.

8 thoughts on “Bond Rating Agency to Discuss Impact of Propositions with City Management

  1. It is a crime that someone who sits about in meetings all and does absolutely nothing useful for humanity would make over HALF A MILLION DOLLARS A YEAR.

    • That’s not all a city manager does. And she is actually under paid for a city of this size. Remember the water issue in Flint? An incompetent city manager was pretty much responsible for that whole crisis.
      Don’t know about you, but I like competent leadership and unleaded water.

  2. This issue was resolved on 11/6. Stop the lies and accept reality.
    We have AAA bond rating for three reasons: low percentage of organized workers. Thus cheap wages.
    2) Aside from the recent Charter Amendments campaign, little if any organized political opposition to a city government owned by the local capitalists.

    • Oops. #3 A systemic process of maintaining defacto segregation in our public school system by way of 16 separate and unequal school districts. An uneducated workforce translates to low paying jobs or crime.

      • First of, give it up with calling people liars. It makes for an argument that is purely subjective. You can go to Fitch’s website and look up their warning to San Antonio. Plus, you’re not calling the city nor this media outlet a liar, you’re calling Fitch a liar about a statement they are making concerning how they are going to handle their business affairs.

        The city government has nothing to do with the fact that separate school districts exist. That’s why they are called independent school districts. That was put into place by the citizens of Texas wanting state law so that the education of their children is not in the hands of a metropolitan government that also has to make decisions on housing, poverty, utilities, roads, the economy and I can go on. Your previous comments make me believe you are not for city government so why would you want control of education in the city’s hands. If you feel so strongly about not having separate districts, state law says you can start petitions in the districts in question to have an election on consolidating those districts.

        But as someone who has been an educator at both low income and middle class schools/districts in the city, you have no idea the amount of money being given the low income schools by the state if they are classified as under performing. It dwarfs what a middle class, acceptably performing school gets. Under performing schools get money thrown at them to hire extra staff, implement intervention programs and raise the overall performance of the school. Unfortunately, that extra money is usually mismanaged and money doesn’t fix the underlying issue. I’ve seen successful students at low income schools and middle class schools and they all have one thing in common that makes them successful. I’ve seen students perform poorly at both low income and middle class schools (and also at a rich school in the Houston suburbs) and they also have one thing in common with each other that makes them poor performing students. Those things that are in common have nothing to do with the school’s financing nor do they have to do with a lack of quality teachers. But outsiders (outside of education that is) will never figure it out until they stop trying to blame others and actually getting deeply and personally (not as in it affects you personally but personally trying to make a change for the better in the system working at it on a daily basis, being in the trenches) involved.

  3. I wonder if there will be a petition drive to revoke Prop C if our bond rating lowers and interest rates go higher. Nah, Sculley will be blamed for that too

  4. Personally, I think that the citizens of San Antonio were bullied into voting for Proposition B. Maybe. Sculley is responsible for running the city smoothly while managing thousands of city employees. If SHe were a HE would people have been so vocal about how much money she makes? How many people would be on call 24 hours a day, 7 days a week? As for the firefighters union being able to call for arbitration when they have refused to come to the table is outrageous. I hope these issues are taken to court.

  5. Dewey
    on November 14, 2018 at 11:08 PM said:
    I’m with you on your comment and applaud you for saying what you have.
    Ever thought of running for Mayor?
    City Council position not for you

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