How fiscally sound is Manteca?
Moody’s Investors Services — one of three credit rating firms that assess the risks investors have for buying bonds issued by government agencies and businesses — believes the City of Manteca “has a sound financial position.”
So sound it has given the city an Aa2 rating that qualifies it as a “very high credit grade.” The highest on the Moody’s credit rating scale is Aaa followed by “very high grade” at Aa1, Aa 2, and Aa3. “High Grade” credit ratings are A1, A2, and A3 while Baa1, Baa2, Baa3, and Baa4 are “Good Credit” grades. There are three additional levels — speculative grade credit, very speculative credit, and substantial a risks/in default.
The higher the credit rating the lower the rates are for general obligation bonds. Higher rates also mean more investors will try and buy any debt the city may issue.
According to Moody’s the “city’s sound financial position, supported by ample reserves and liquidity (leads them to expect the city) to remain stable given management’s prudent fiscal practices, sizeable tax base, and solid socioeconomic measures. The rating also reflects the city’s minimum net direct debt burden.”
The rating noted the city’s elevated pension and post retirement benefit burdens prevented it from getting a higher rating. The city has taken steps to reduce its liability with changes in retirement age for new employees and shifting of some of the pension costs to existing workers.
If the city is unable to manage rising pension costs, it would constitute one of the factors that would lead Moody’s to downgrade the city’s credit rating.
Strong points the Moody’s rating points out include the City of Manteca having:
*a general fund surplus for eight consecutive years.
*overall general fund balances of $27.5 million or 71.6 percent of revenues.
*a five-year average for overall general fund reserves of $21.6 million or 63 percent of available general fund revenue. That is above the median for other cities nationally that share Manteca’s Aa2 credit rating.
*reserves of $43.1 million when general fund reserves are combined with public safety sales tax, landscape maintenance districts, development services, state gas taxes and Measure K sales tax. The overall reserves are 79.8 percent of revenue.
*its “healthy financial profile further re-enforced by a formal reserve policy.” That includes maintaining a fiscal stability reserve at least equal to 30 percent of expenditures and a pension stabilization reserve at least equal to 5 percent of expenditures.
*an unassigned general fund balance of $15.3 million “equaling a solid 39.3 percent of revenue.”
*net cash on hand for the general fund of $26.3 million or 68 percent of revenue.
*all outstanding government debt at a fixed rate with the loans set to be paid off in 2021.
*unemployment continuing to improve from a pre-recession peak of 15.2 percent in 2010 to a low of 3.9 percent in May 2018.
*a total assessed value tax base of $7 billion, reflecting a 55 percent overall increase since the Great Recession.
The City Council will review the Moody’s report when they meet Tuesday at 7 p.m. at the Civic Center, 1001 W. Center St.
To contact Dennis Wyatt, email firstname.lastname@example.org