As a result of the town’s growth, conservative budgeting practices and other information displayed in presentations to stock market gurus, laced with a little southern story-telling, they won for the town a full AA bond rating from Standard & Poor’s, a rating agency.
That’s up three steps from its present A rating. (In between there is an A t-rating and an AA- rating.)
Only one higher rating is possible, an AAA.
From Moody’s Investors Service, the town’s existing A1 rating was confirmed. Moody’s had just conducted a review of the town’s rating in May of 2009 and was reluctant to upgrade so soon. The town is confident that given a little more time and continued growth Moody’s will be able to upgrade the rating in the near future.
What the higher rating means to Fuquay-Varina is the town is likely to get a better (i.e. lower) interest rate on bonds it will be selling this week.
After months of work making a case based on the town’s careful, conservative spending practices, the formal reports were taken to New York by Mayor John Byrne, Town Manager Andy Hedrick and Finance Director Carla Morgan. Each made an oral report to representatives of both rating agencies after submitting a four-inch thick written report.
The three were ecstatic at last week’s town board meeting when announcement was made of the AA rating, awarded by Standard & Poor’s.
“It’s the biggest, the most exciting thing that has happened since I’ve been mayor,” said Byrne. Byrne has held the post since 2001. “I’m practically giddy.”
After the board meeting, all three complimented each other’s presentations. Ms. Morgan put in a special “thank you” to Planning Director Mike Sorensen who helped put together the presentations.
“It all came together so well,” said Byrne who added, in a low tone to this reporter, “I told my Marilyn Monroe story.” That’s the one about the time his father, Tommy Byrne, a pitcher for the New York Yankees, and his wife were about to miss a dinner outing for lack of a baby sitter. Famed pitcher Joe DiMaggio and his wife, Marilyn Monroe, agreed to stay with the boys so the Byrnes could go out. John admits he was too young to actually remember Marilyn, but it makes a good story to know she once babysat him and his brother.
Ms. Morgan said the Mayor did such a good job of charming the ladies who were representatives of the S&P Committee, they were ready to come home with him to see Fuquay-Varina and stay at the Mineral Springs Inn which Byrne and his wife own.
She said she thinks both groups the local delegation spoke to were impressed that Fuquay-Varina had done such a good job of handling the economic challenges of the past 18 months. “Anybody can do a good job in good times,” she said. She thinks they were pleased that the town had done such a good job in difficult economic times.
Ted Cole, senior vice-president of Davenport & Co., hired by the town to serve as financial advisor as the municipality moved through the process of seeking a higher bond rating, said, after the new S&P rating was announced, “It confirms a lot of positive trends within the town..” He said specifically the rating change depicts strong management, solid financial performance, sustained and manageable growth within the town, and it is a reflection of the overall strength of the Raleigh and Wake County area.”
“It’s a significant step,” Cole added. He said it is unusual for a municipality to skip over several steps on the ratings scale as Fuquay-Varina did. Ratings improvements are usually made more gradually, he said.
Fuquay-Varina expects to sell $6.5 million in bonds Sept. 29, the money to be used to build the northwest leg of Judd Parkway and to finance the next step of the Streetscape project. Some old bonds on which the town is still paying will also be sold in the hope of getting a lower interest rate.
In the spring of 2007, local residents voted in favor of a $19 million bond issue to finance the above mentioned projects and several others. In view of recent difficult economic times, the town board voted to delay selling all the bonds and moving ahead on all projects due to the grim times. Board members chose to go forward on the highway project because of the pressing need for relief from heavy traffic flow through town and also because the economic slowdown has led to lower bids on construction projects in general.
As for the Streetscape, that project was moved ahead because plans had already been drawn, and it was ready to put out for bids.
In an interview after the meeting, Ms. Morgan gave “major credit” for the town’s improved bond rating to Hedrick’s financial planning expertise. She said when the town board began talking about a possible bond issue to move along some projects needed to handle the town’s rapid growth, Hedrick developed a proposal which outlined exactly how the bonds would be paid off.
“As soon as the bond issue was approved in 2007, we started putting money away just in case something unexpected happens, and we need it to make a bond payment,” she said. By the end of the 2008-09 fiscal year, the town had over $1million in that fund, she said.
The town board was adamant it didn’t want the bonds to impact the tax rate, she added.
“He is always looking ahead,” Ms. Morgan said of Hedrick. She recalled last (fiscal) year when many towns and agencies were announcing they were not going to meet their budgets, Fuquay-Varina did.
At the end of the local trio’s successful venture on Wall Street, they, plus the two financial advisors, got treated to a New York Yankees ballgame, thanks to Mayor Byrne’s continuing connection to his late father’s career team.