STOCKTON — The city’s general fund bonds have been upgraded by Standard & Poor’s, and now the financial outlook moving forward has been declared “positive.”
The revenue bonds, backed by $9.4 million in general fund monies, improved the rating on the Stockton Public Financing Authority, California, portfolio “four notches” from B-minus to BB.
First issued in 1999, the bonds were last upgraded in 2006.
The upgraded bonds were issued by the city’s PFA to finance the building and parking structure known as the Stewart Eberhardt Building at 22 E. Weber Ave.
The building is currently occupied by a portion of the Stockton Police and Public Works departments.
Matt Paulin, the city of Stockton’s chief financial officer, said S&P’s upgrades are more of a reflection of the health and strength of the city’s general fund.
This past summer, the Stockton City Council approved a fiscal year 2018-19 budget that anticipates $229.6 million in general fund revenues and $220.6 million in expenditures.
Paulin said S&P typically upgrades bonds by one or two notches, so to receive an increase of four is a big deal.
“This shows that S&P thinks we’re on the right path, the right trajectory, and that we’re on our way,” he said. “It’s another affirmation that we are keeping to our goals of financial sustainability. We’re doing good things.”
According to S&P’s Global Ratings Definitions page, a rating of BB means an obligation is less vulnerable to nonpayment.
The former rating of B-minus meant the city’s obligations were more vulnerable to nonpayment, but the agency had the capacity to meet financial commitments.
Paulin said the upgrade has no bearing on Stockton’s buying power, but does allow for better interest rates if the city was issuing new lease debt. However, he said issuing new lease debt is not on the horizon.
In its Aug. 17 credit profile report of the Stockton PFA, the S&P stated, “The rating action reflects our view of the city’s sustained strong-to-very strong financial performance, sustained very strong budgetary flexibility, and institutionalized integration of a revised reserve policy into its last three budget cycles.”
Paulin said the company was impressed with the city’s general fund reserve policy, which dictates how funds left over at the end of a fiscal year are used in other budget areas.
In addition, he said the S&P was happy that city staff provides the City Council and the public with quarterly budget updates.
“They see this as not just a one-off presentation we do,” he said. “We’ve done this for a number of years, and they see this is something we’ve institutionalized as part of city operations.”
In the credit overview of the Stockton PFA, the S&P noted a strong budgetary performance with an operating surplus and break-even operating results in fiscal year 2017-18.
The company also highlighted strong budgetary flexibility and strong liquidity as reasons for the upgrades.
For more information about Stockton’s fiscal standing and a copy of the S&P Global Ratings report, go to stocktonca.gov/budget.
Contact reporter Wes Bowers at (209) 546-8258, or email@example.com. Follow him on Twitter @WesBo26.