Manteca has earned higher credit worthiness ratings on both their water and sewer bonds.
While other California jurisdictions such as Fresno that had their bond ratings downgraded by Standard and Poor - Fresno went from “A” to “BBB” earlier this month, Manteca received an improved rating going from “A+” to “AA-“on their outstanding water bond debt of $41.6 million.
Fitch - another one of the big three credit rating agencies that also includes Moody’s - earlier kicked up Manteca’s wastewater treatment bonds to “AA-“ from “A+”. Manteca has $45.8 million in outstanding wastewater bond debt.
That means the firms that determine risk to lenders rate bonds issued by Manteca as high grade where as just a year ago they were considered upper medium grade. The ratings that run from a low of “D” to a high of “AAA” reflect an agencies’ financial worthiness, ability to repay debt, size of its cash reserves, and overall fiscal management. There are only three rating steps higher than what Manteca has.
The bond ratings are akin to personal credit ratings. The higher the rating, the lower the interest rate charged.
City of Manteca Finance Director Suzanne Mallory noted the ratings were good news as they re-affirmed how the city has managed its debt and finances. She also noted Manteca has no bonding debt secured by the general fund as some cities do.
“They (the bond raters)” were the toughest they have ever been,” Mallory said of the latest round of ratings in regards to their exanimation of Manteca’s debt.
That is a reflection on the growing concern nationally about the potential for municipal bankruptcies. So far in California, Stockton and San Bernardino have filed for bankruptcy over general fiscal years while Mammoth Lake has sought protection due to a lawsuit judgment that they can’t pay. Dozens of other jurisdictions are considered on edge.
Both Manteca’s water and sewer operations have gone four years without rate increases. At the same time, they have undergone major expenditures for system upgrade including multi-million dollar arsenic treatment plans.
The only black mark on Manteca’s financial record are redevelopment agency bonds that for the short term have been dropped to BBB because of concerns underwriters have with how the state is handling the tax increment flow to pay off the bonds in the aftermath of Sacramento’s seizure of RDAs. Prior to the state taking over the Manteca RDA bonds the agency issued had a short-term rating of “A”. The lower rating reflects the fact the state is opting on holding up giving tax increments back to the successor agency for the Manteca RDA to meet their debt obligations. Manteca last week transferred money back to the oversight agency form the general fund. The $10 million that was moved once was the tax increment reserve in the Manteca RDA. Manteca still has $42 million in bond proceeds that legislation will allow it to use for specific transportation projects. It was unclear until recently whether the seizing of RDA assets also meant that accumulated tax increment reserves would also go to the state or be used to cover debt.
Other California cities that lost their RDAs have found themselves in a financial squeeze making it difficult to pay RDA debt thanks to the state’s stalling on the release of tax increment collected that has the first obligation to cover debt.