Fitch Ratings bumped Dover's 2003-series water and sewer bonds to A-plus, but a city official says interest rates are still too high for another bond sale.
Despite the current economic downturn and the city of Dover’s announcement that it faces a $1.8 million revenue shortfall, a top national bond rating agency recently upgraded $4.5 million in outstanding bonds for the city’s water and sewer system.
Fitch Ratings announced Jan. 13 that the bonds, previously rated A, were boosted to A-plus. The agency also reported the rating outlook was stable, considering the city’s adequate reserve funds and cash-on-hand liquidity.
In an email to city council members last week, city Controller/Treasurer Donna Mitchell said the improved rating was good news, especially because rating agencies were forced to reexamine their processes after many highly rated companies collapsed last fall.
The city currently pays an average of 3.5% interest on the 2003 series water and sewer bonds, Mitchell wrote in an email to the Dover Post.
While the improved rating won’t affect the interest rates on these bonds, Mitchell said it would help the city with future debt.
“The new rating demonstrates the city has less credit risk and therefore can obtain a more favorable interest rate,” she wrote. “The city will be able to reduce its interest cost on future borrowings and therefore have less cost to be incorporated into the utility customers’ monthly bill.”
But the larger economic situation still may trump the city’s good credit rating.
In November, City Manager Tony DePrima announced that the city would postpone the sale of more than $11 million worth of bonds for capital improvements to Dover’s water and sewer system.
At the time, Mitchell said a hamstrung credit market was pushing interest rates for new bonds out of the city’s reach. She said the city is looking for rates under 5%.
For now, a new bond sale still is on hold, but things could change if the market improves or new federal funding becomes available, Mitchell wrote.
“The city is still monitoring the markets,” she wrote. “We are also reviewing our options in applying for the economic stimulus package that the federal government is proposing for infrastructure projects.”
Earlier this month, DePrima emailed council a $14 million wish list of water and sewer projects the city is ready to move forward with if it receives federal funds. DePrima also sent the list to each member of Delaware’s congressional delegation.
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