Financial advisor assures Augusta is fit to borrow for cyber parking garage

EDITOR'S NOTE: A meeting Friday between Moody’s Investors Service and Augusta officials was mischaracterized in a May 12 article on Page 1B of TheAugusta Chronicle. The meeting took place by conference call.

 

In addition, some Georgia governments that have reached their millage caps were misidentified as being downgraded by ratings agencies;those governments have instead been rating-capped, making it difficult for them to be upgraded.

The Chronicle apologizes for the errors.

 

Augusta’s financial adviser presented a rosy picture with a few areas for improvement as the city prepares a $12 million bond sale to finance construction of a parking deck in support of the Georgia Cyber Innovation and Training Center.

Davenport and Co. Senior Vice President Courtney Rogers gave a detailed overview of the city’s standing with Moody’s, currently the only agency rating all city bonds, and said Moody’s officials will be in contact via conference call today.

Moody’s Aa2 rating – considered “very strong” and investment grade – on Augusta’s November sale of sales-tax backed bonds noted the city’s strength as a regional economic center with a strong military and health care presence, historically sound reserves, a low direct-debt burden and manageable pension costs, Rogers said.

Despite Augusta’s ability to pay its debt, below-average socioeconomic factors and above-average unemployment challenge the rating, as do reserves still depleted by cleanup expenses from the 2014 ice storm, he said.

The Georgia Constitution limits the amount of long-term debt payable by property taxes to 10 percent of the assessed value of taxable property – and Augusta’s existing liability is only $26 million, well below its legal limit of $489 million, Rogers said.

“You’ve got plenty of room on the legal side to issue general obligation bonds,” he said.

Only three of the city’s 12 bond issues are included in the debt ratio – the 2016 sales tax bonds, the 2014 Urban Redevelopment Agency bonds that financed renovations at Augusta Municipal Building and the 2010 Coliseum Authority bonds used to build Augusta Convention Center. The remaining issues are not directly backed by the city’s full faith and credit but instead by either the $1 tourism fee or landfill, water system or airport revenues.

Rogers said some of his firm’s other municipal clients have seen bond ratings rating-capped when the government reaches its self-imposed millage rate cap, something Augusta has not done, or when they’ve dipped into fund balance to support enterprise funds like water and sewer. Rating-capped means it is difficult for their rating to be upgraded.

The city is in good shape repaying all existing debt within a decade, with some 70 percent to have been repaid in 2026, according to the report, with total outstanding principal at $71.8 million and interest at $21 million, but removing the sales tax debt leaves only 53 percent repaid in 2026.

The city needs to rebuild its reserves and is moving toward that end, Rogers said. By comparison, “AAA” rated counties such as Columbia, Forsyth and Gwinnett have 40 percent or more of their revenues unassigned in their fund balance, according to Rogers’ presentation.

Other jurisdictions such as newly consolidated Macon-Bibb are threatened with ratings drops as the government contends with a 20 percent annual budget reduction required by the consolidation and uses its fund balance to balance the budget, Rogers said.

Davenport is recommending a competitive sale of fixed-rate bonds for Augusta’s parking deck, rather than a negotiated sale, using Moody’s ratings alone in the rapid turnaround required for the state project, he said.

“It makes sense to do competitive sales,” Rogers said. “There is no uncertainty in the marketplace right now” and a recent offering drew 15 bids, something Rogers said he’d never seen.

The city has said it will delay principal payments to 2023, which Rogers said will allow repayment to be placed on the next sales tax referendum to “possibly pay this debt off” sooner.

The parties were prepared to present a bond resolution to the commission May 16 but is “waiting on the state at this point” to provide a few additional business details, he said.

Rogers said the future of downtown Augusta looks bright and has the potential to bring many new permanent residents, particularly with the state building a $50 million cyber center downtown.

But the city should continue to build its fund balance, to pre-ice-storm levels, and refrain from spending it, he said.

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Reach Susan McCord at (706) 823-3215 or susan.mccord@augustachronicle.com.

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