[B]URLINGTON — The Queen City has an A credit rating for the first time since a series of downgrades in 2012 that the mayor has described as pushing its rating to the edge of junk bond status.
The credit rating agency Moody’s Investors Services upgraded its rating of Burlington’s $109 million in outstanding general obligation debt from Baa2 to A3 on Wednesday. That’s a two-step increase, based on Moody’s rating system, a jump that city officials said is rare.
It’s the second upgrade during the mayor’s tenure, with the previous coming on Town Meeting Day 2015.
The city’s rating is now six steps below Moody’s highest level, Aaa.
Moody’s cited a strong underlying economy as Vermont’s largest economic center as well as “conservative budgeting and prudent expenditure management,” which has contributed to Burlington’s third consecutive operating surplus last fiscal year.
The improved rating will save taxpayers money by lowering the city’s cost of borrowing and allowing it to refinance existing debt at more favorable rates, said Mayor Miro Weinberger at a Thursday news conference.
The best part, according to Weinberger? “We were able to do it without significant cuts to services or major tax increases,” he said.
Weinberger ran in 2012 on a promise to restore Burlington’s finances, which were in steady decline after revelations in 2009 that former Mayor Bob Kiss spent $17 million without authorization to prop up Burlington Telecom.
Moody’s began downgrading Burlington’s credit rating in 2010. Weinberger said with this week’s upgrade the city is now halfway back to the rating it had before that saga started.
The two main factors driving the fiscal turnaround are the issuance of $9 million in bonds in 2012 to end Burlington’s reliance on short-term borrowing, and the settling of a $33 million lawsuit brought by Citibank, the telecom utility’s main creditor, for $10.5 million in 2014. Weinberger counts those as two of his largest accomplishments as mayor.
A better credit rating signals to financial markets that holding Burlington’s debt is a safe investment and therefore deserving of lower interest rates.
Burlington is refinancing roughly $30 million of its debt in transactions that will be completed in April. Lower interest rates on that debt, thanks to the rating upgrade, will result in $450,000 in savings, according to city officials.
Refinancing the debt was previously projected to save the city $1.3 million because of its already improving credit. The most recent upgrade is expected to push that to $1.75 million, officials said.
Taxpayers will be able to keep more money in their wallets as a direct result of those interest rate savings, Weinberger said.
Over the next four years the city hopes to find $47.7 million to pay for planned capital improvements. Those include repaving close to a quarter of Burlington’s roads and sidewalks that are in poor condition, completing the waterfront bike path, replacing old firetrucks and renovating City Hall Park.
Weinberger said he plans to ask voters to approve a property tax rate increase on the November ballot to help pay for that spending. Thursday he said financing those improvements will require $130,000 less in tax revenue now.
City officials are still crafting next year’s budget, so it’s unclear how much capital spending the mayor plans to fund with a tax increase and what percent of that increase $130,000 would represent.
