‘Exceptional’ credit ratings mean big savings over life of anticipated loan

Whether in business, government, or personal finances, credit ratings matter. Excellent credit ratings mean lower interest rates, making the cost of a loan much lower than it would be for a borrower with poor credit.

City of Avondale Estates recently announced that it has received what it characterizes as “exceptional credit ratings” from Moody’s and Standard & Poor’s (S&P), two of the nation’s largest credit rating agencies. Standard & Poor’s has assigned Avondale Estates an initial rating of AA+ with a stable outlook, and Moody’s has assigned the city an initial Aa1 general obligation unlimited tax rating.

“These are roughly equivalent ratings, and they are really good news,” explained Avondale Estates City Manager Patrick Bryant. The ratings come in support of the city’s anticipated $8.4 million Urban Redevelopment Agency Revenue Bonds Series 2023. Both Moody’s and Standard & Poor’s cited the city’s strong economic outlook, sound budget management and financial policies among the reasons for the high ratings.

“The city’s budget management is very strong as evidenced by the maintenance of excellent reserves and liquidity. Transparency and disclosure are favorable due to quarterly disclosures, while the city’s strong formal fund balance policy speaks to above average policy credibility and effectiveness,” stated Gregory Max Sobel of Moody’s in reporting the agency’s conclusions about Avondale Estates’ credit worthiness.

Bryant explained that the favorable credit ratings are the result of careful budget management, zoning codes and other specific steps by the city during the past five years. “I am grateful that we have a Board of Mayor and Commissioners and a staff who are all working together toward the same goals. We share a vision. Without that shared vision this would not have been possible,” he said.

The ratings from S&P and Moody’s place the city in exclusive company, Bryant noted. Avondale Estates is the highest-rated small city—with a population of 5,000 or less—in Georgia by Moody’s and in the top 10 percent of ratings for small cities—with a population of 5,000 or less—nationwide. Avondale Estates has the smallest tax digest and fifth smallest budget of all cities rated Aaa/Aa1 by Moody’s.

“This comes in a year when the city has received many other prestigious recognitions,” Bryant said, citing the Urban Land Institute of Atlanta’s Development of Excellence Award for Avondale Estates’ Town Green and the city’s being name #15 nationally in Opendoor’s list of Family Friendly Cities. “All this tells us we are moving in the right direction, and we can look forward to great things in the future.”

“We have taken great pride in managing the city’s finances in a disciplined and efficient manner,” said Avondale Estates Mayor Jonathan Elmore in announcing the financial news. “Our strong fiscal management policies have enabled us to continue to enhance the quality of life for our residents while delivering a strong return on investment for all stakeholders within the city. We are honored to meet the highest standards of fiscal responsibility by both Moody’s and Standard & Poor’s.”

“Even a fourth of one percent in interest can mean a difference of $500,000 to $600,000 over the life of the loan,” Bryant pointed out. “This is money the city can use to keep taxes lower or pay for projects beneficial to the city and its residents.”

In 2019, the city contracted with Davenport & Company LLC as its financial advisor. The advisors began exploring financing opportunities and assisted the city’s Urban Redevelopment Agency with an agreement with PNC Bank to provide an $8.4 million Bond Anticipation Note to finance the costs associated with the construction of the city’s award-winning Town Green and Market Pavilion. The proceeds of the 2023 series bonds are slated to permanently finance that loan.

“We are proud of what we have done and what we are doing. We feel that we have set an example that other cities our size can follow,” Bryant said.