By Conrad Dudderar
A new bond rating increase bodes well for Yukon taxpayers, the City of Yukon’s financial advisor says.
Since Yukon has old bond issues that are still rated, the rating agency Standard & Poors (S&P Global) recently reviewed the city’s “investment-grade” bond rating.
Because of the City of Yukon’s improved financial condition over the past six years, it has increased two full credit ratings from A to AA-.
“Yukon had been downgraded a while back and it hadn’t been reviewed in quite some time,” said Chris Gander, senior vice president and investment banker with BOK (Bank of Oklahoma) Financial Securities. “It’s a huge deal to get upgraded two notches. If you’re not in the bond business, you don’t realize the significance of that as it relates to borrowing money.
“The banks and individuals that lend money are going to look at the last rating, and that’s going to correlate to your borrowing costs.”
Gander addressed city council members at their Feb. 15th study session, focusing his presentation on Yukon’s recent bond rating upgrade.
Besides increasing two full credit ratings, the City of Yukon has a “stable outlook” within its new AA- rating.
“That translates into hundreds of thousands of dollars in interest savings,” said Gander, who has more than 21 years of experience in the municipal finance industry. “No matter where you borrow the money from, they’re going to look at that rating and see a better credit quality with the city.
“So that’s obviously passed on, whether to your utility rate payers, sales taxpayers or property taxpayers.”
The City of Yukon faced a financial crisis in 2016 before the city council hired a forensic accountant to review how it had occurred.
“They looked at it, and everything’s been clean ever since,” Gander said. “You made some substantial changes as it relates to management and some procedures.
“That’s the reason (S&P) upgraded it. To the council, to the staff, everybody – congratulations. It’s a major accomplishment to get upgraded like that.”
IT’S BEEN CLEAN
A written summary of S&P’s recent rating action refers to the City of Yukon’s improved “financial management policies and practices” and a “lack of audit findings” since fiscal year 2017, along with a “very strong” reserve fund.
The city’s bond rating was previously “capped” because of a “weak management score” and “vulnerable financial management assessment (FMA),” the document reads.
“Yukon’s improved FMA is due to recently maintaining consistent procedures for budget development and financial performance monitoring. In addition, its three most recent audits have not included any auditor findings.”
Mayor Shelli Selby reacted favorably to Gander’s Feb. 15th bond rating report.
“I am thrilled with that, and I think that’s due a lot to our leadership in our city,” Selby said.
Also in his recent presentation, Gander briefly discussed capital funding options.
The financial advisor noted the City of Yukon has only 10 years left on outstanding bond debt.
“Your debt service doesn’t fall off until 2032, but if you look at your debt as a whole, that’s a very rapid amortization schedule,” he told council members.
“That’s another big ‘feather in your cap’.”
The Yukon City Council will discuss calling an election – possibly in August – for voters to consider proposed capital improvements.
If approved, the projects could be funded with a dedicated sales tax or ad valorem (property) tax levy – both of which require voter approval. A third option is a utility system revenue note.