City receives S&P rating for bond; outlook stable

BELLA VISTA — The city received a AA- rating from Standard & Poors for an estimated $24 million in municipal bonds the city is expected to sell this year.

The bond funds, to be paid by a 1% city sales tax, will cover a new public safety building to include the Police Department, dispatch office and court facility; a fire training facility off Chelsea Road and the razing and rebuilding of Fire Station No. 3. These projects were approved by voters during the March 3 primary election.

Mayor Peter Christie said he’s pleased with the rating but he was confident the city would do well because it’s well prepared with strong financial reserve, private sector audits over the last two years and financial guidelines that include long-term plans.

“They were quite impressed,” he said. “They were delighted that we actually had something in place and that we were looking out five years in the future.”

The city’s relatively low debt — including loans on two firetrucks and half of the streets building — was another factor, he said, as was a lack of expected future debt.

Additionally, the city has been increasing personnel and equipment in preparation for setting up the facilities, so significant increases in personnel aren’t expected in the near future, Christie said.

It’s important to have a rating from a reputable financial entity such as S&P because it will help prospective investors feel comfortable purchasing the bonds, officials said.

Christie said a great deal of credit for these preparations goes to the city’s finance director, Cary Elsten.

With the rating in place, the city can expect a more favorable interest rate on bonds, which are expected to sell after a special City Council meeting. Christie said he expects to see something Sept. 1.

The bonds themselves are among the last step the city needs to take to get the projects moving, he said, because engineering and architects are already in place.

“All the pieces of the puzzle are now in play,” Christie said.

During the Aug. 17 City Council work session, Daniel Allen, a senior vice president with Raymond James, said a AA- rating is excellent, particularly for a city that has never been rated before.

With all the pieces in motion, the city could have money in the bank by early October to get these projects moving, he said.

“You’ve seen a process that’s taken a couple of years to get to this point. We’re there,” he said.

Allen said his firm will push for as low a rate as possible and a 25-year term, which should be more than twice the estimated 10.5 years the city actually needs to pay off the loan.

While investors are hesitant because of a possible recession, Bella Vista has a solid tax base primarily fueled by residents’ staple purchases, he said. The recently-instated internet sales tax is also a significant help, he added.

A news release issued by Standard & Poors cited three primary considerations in the firm’s rating of the city, including Bella Vista’s economic growth, 2019 sales tax collection providing 1.89 times the maximum annual debt service coverage and low volatility in sales and use taxes.