The City of Opelika was notified by Scott Sagen of Standard & Poor’s (S&P) during the last week of June, 2009 that their bond rating has been upgraded from an A+ to AA-. Standard & Poor’s, a division of the McGraw-Hill companies and one of the national credit rating agencies, provides meaningful opinions on the creditworthiness of a borrower. Credit ratings play an important role in the growth and effective functioning of the global capital markets, which is why S&P continues to take steps to provide investors with enhanced transparency for assessing credit risk and greater clarity about the ratings process.
Opelika is one of 19 Municipalities in Alabama, Louisiana, Mississippi, Oklahoma, and Texas which were upgraded after review of their credit strength. The criterion that goes into assigning a bond rating includes: economy, debt structure, financial condition, demographic factors, management practices of the governing body and administration. These criteria are also used to analyze revenue bonds and lease obligations. Standard & Poor’s reasoning for upgrading Opelika can be found in their assessment analysis overview, which states:
Opelika, with an estimated population of 29,000, is located just east of Auburn in eastern Alabama. The city serves as regional retail center, as evidenced by what we consider a strong 179% retail sales per capita, and its strong market value per capita reflects in our view healthy industrial investment and development. Following three consecutive years of general fund surpluses equal to at least $4 million, we believe the city’s financial position is solid with very strong reserves equal to 61% of expenditures. We understand that management does not plan to draw down reserves, and has an informal reserve target equal to 20% of expenditures. The city has historically funded its capital needs on a pay-as-you-go basis, so debt levels are in our view moderate.
Upon hearing the news, Mayor Gary Fuller stated, “This is great news for the City of Opelika. All of us….Administration and City Council have worked hard to be good stewards of taxpayer money and I appreciate Standard and Poor’s for recognizing Opelika for our efforts, especially during these tough economic times when many communities are having a difficult time making ends meet. This new rating will help us in our continuing efforts to properly grow and develop this great city!”
City Council President Eddie Smith, who is also the Senior Vice President of AuburnBank of Opelika, agreed with the mayor’s assessment and stated, “The upgrade in the City’s financial rating from A+ to AA- speaks highly of the administration and City employees in their diligence of managing the tax payers’ money. This rating puts our City in a class which only a very few other cities in the State of Alabama can claim. This rating will certainly be beneficial as we look down the road toward financing such things as fiber optics, waste treatment plants, schools and roads. Congratulations to everyone involved on a job well done!”
S&P’s rating grades are as follows:
Best Quality – AAA
High Quality – AA+ / AA / AA-
Upper Medium Grade – A+ / A / A-
Medium Grade – BBB+ / BBB / BBB-
