Bronson hesitant on his $37M road and infrastructure bond amid S&P downgrade
ANCHORAGE, Alaska (KTUU) - A bond rating is the credit worthiness of a municipality. In other words, the higher the bond rating the cheaper it is to essentially borrow money, but in mid-November, S&P Global Ratings downgraded the Municipality of Anchorage’s general obligation and certificate of participation bonds rating from a “AAA” rating to a “AA+” rating.
How did this downgrade of the municipality bond rating happen?
“So we didn’t do anything unusual, we just told the truth,” said Municipal Manager Amy Demboski on Tuesday. “We showed them where our audited financials were and from there, you know, the bond rating agency downgraded us to a AA+.”
Some blame overspending, a decline in available reserves, or how the information was presented to the bond agency. During a recent Anchorage Assembly meeting, assembly members said the bond rating concerned them and said that they had questions about how financial information was presented to the agency.
During last week’s assembly meeting, Assembly Chair Suzanne LaFrance said she had challenges with the information in the administration’s press release about the bond rating decrease. She requested that the administration provide and present to the assembly and public “exactly what was presented to the rating agencies.”
“Depending on how information is delivered to the agencies, that can influence how they make their decisions,” she said.
“In one year, the Berkowitz administration told the bond rating agencies we were going to have an $80 million surplus when in fact we have a $40 million deficit, that’s a $120 million swing,” Demboski said Tuesday. “That is significant when these bond rating agencies are determining what in fact the financial outlook is of the municipality.”
A rating presentation to rating agencies from 2020 shows the city was projecting a preliminary forecast that, by using CARES Act grant funds, the city could possibly end up with a fund balance of around $80 million. A rating presentation to rating agencies prepared by the Bronson administration shows a projected 2021 fund balance deficit “due to delayed COVID and Earthquake FEMA reimbursements.”
In previous assembly meetings, several members of the assembly have countered that the city is spending the money it has saved for the kind of emergency it was meant for — that emergency being the COVID-19 pandemic — and that reimbursements from federal agencies will not leave the fund balance with a deficit.
On top of the few millions in bonds proposed by the assembly and the $110 infrastructure bond from the Anchorage School District, Bronson is looking to propose a $37 million bond to the voters in the spring for road projects and critical infrastructure projects in the municipality, but could be now taking a step back after mentioning a bond holiday.
“The mayor believes it may be time to not only kind of take a breath, take a step back, and reevaluate critical needs versus like to have, or nice to have, but that just simply may mean they mayor may or may not be proposing bonds in the 2022 year,” said Demboski.
Demboski said the mayor should have a better outlook by some time in January when the bonds will be debated by the assembly.
“Our current budget does show a potential $37 million worth of road projects, critical infrastructure projects, however we’re going back through that process right now and evaluating if any of these can be held off another year,” Demboski said.
How will this bond rating downgrade impact the community?
“And when that money becomes more expensive, it means we get to do less projects and the projects that you do do are more expensive for the tax payers,” Demboski said. “This isn’t free money, this is money directly you, me, your mom and dad. Everybody pays when they pay their mortgage and their property taxes.”
Since these are bonds, the community votes whether to pass them or not.
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