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December 16, 2010
Moody’s gives Gulfport highest bond rating on Coast
GULFPORT — The City of Gulfport has received the highest bond rating of any Coast city, allowing the local government to borrow long term at a much lower rate and making the city’s bonds more attractive to potential investors.
Moody’s Investors Service Inc. has given the city a bond rating of Aa3, affecting about $34 million in general obligation debt. Gulfport is now one of only seven Mississippi municipalities with such a rating.
A major reason for the strong rating, Moody’s noted, was that Gulfport had achieved an operating surplus of $275,985 for fiscal year 2010, which was originally expected to be a $2.7 million deficit.
The city began battling budget woes in 2006, the start of a three-year stretch of financial deficits. When Mayor George Schloegel and the current City Council took office in June 2009 the city faced a $9 million shortfall.
In October, the council approved the Schloegel administration’s 2010 spending plan, allowing the City of Gulfport to operate in the black for the first time since 2006.
“Balancing the budget was critical and all of our department heads worked incredibly hard to get it done,” Schloegel said. “This new bond rating is evidence of their determined effort.”
While the new rating qualifies the city to borrow long term at a lower rate, the City of Gulfport does not anticipate any such borrowing at this time.
In its report, Moody’s listed the city’s substantial tax base and below-average unemployment as a significant contributor to Gulfport’s new rating. Also mention was the city’s modest debt burden with no plans to issue additional debt and its added flexibility through additional reserves in debt service and health funds.
The investor services firm also stressed that Gulfport’s “ability to return to structurally balanced operations, while maintaining adequate available reserves will be critical to preserving overall credit quality.”
Moody’s top rating is AAA, followed by Aa1, Aa2 and Aa3. All four ratings are considered high-grade bonds.
The bond rating is slightly similar to previous ratings the city has received when seeking to borrow money, but Moody’s recently restructured its rating system to better match the one on Wall Street.
Long-Term Obligation Ratings
Moody's long-term obligation ratings are opinions of the relative credit risk of fixed-income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Such ratings reflect both the likelihood of default and any financial loss suffered in the event of default.
Moody's Long-Term Rating Definitions:
Aaa: Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.
Aa: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A: Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa: Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
Ba: Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.
B: Obligations rated B are considered speculative and are subject to high credit risk.
Caa: Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.
Ca: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C: Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
—Moody’s Investors Service Inc.
Office of Public Information - rlafontaine@gulfport-ms.gov - Phone: 228-868-5782
P.O. Box 1780 Gulfport, MS 39502-1780 - FAX: 868-5800
