Upgraded Water, Sewer Bond Ratings to Yield Significant Savings For City of Melbourne
By Space Coast Daily // March 21, 2016
upgraded by Moody's Investors Service
BREVARD COUNTY • MELBOURNE, FLORIDA – Two major ratings agencies have upgraded their ratings of City of Melbourne bonds, which will result in significant savings when the bonds are renegotiated at the end of March.
Moody’s Investors Service has upgraded the City of Melbourne’s Water and Sewer System Revenue bonds to Aa2 from Aa3, and Fitch Ratings has upgraded the bonds to AA from AA-.
Bond ratings demonstrate the credit-worthiness of government bonds. The amount of money a city pays when financing large projects is determined by its bond ratings, just as the amount of interest an individual pays on a car loan is determined by that person’s credit score.
Because of these recent ratings upgrades, the City of Melbourne is expected to save approximately $2 million over the remaining life of a series of water and sewer bonds in a refunding negotiation that will close at the end of March.
“The ratings upgrade results in lower interest rates when the City accesses the capital market, which in turn allows the City to maintain competitive water and sewer rates,” said Michele Ennis, Director of Finance for the City of Melbourne.
Tax exempt municipal bonds are debt obligations issued by public entities to fund large-scale public projects like the City’s water and sewer system. The water and sewer revenue bonds are secured by the revenues of the water and sewer system.
“Another refunding will take place in July that is expected to generate even higher savings,” Ennis said.
A refunding occurs when interest rates are favorable to refinance the balance of the existing debt, similar to refinancing a mortgage for the remaining years left of the existing loan.
In their assessments, both Moody’s Investors Service and Fitch Ratings predicted their upgraded ratings would remain stable, noting the city’s strong management of its water and sewer system, reduced capital costs, carefully considered rate increases, and multiyear planning.
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