A better bond rating likely will lead to savings for Kettering’s $29 million fire station project.
The city issued bonds last week for four planned new fire stations and refinanced its municipal court building after its bond rating was upgraded this month to the second-highest possible status.
Moody’s Investor Service upgraded the city’s bond rating on Jan. 13 from AA2 to AA1, which is one level below the company’s best rating of AAA. The better rating means the city is seen as a safer investment and will likely lead to cheaper rates, according to city manager Mark Schwieterman.
“We did quite well in getting an upgrade that gives us similar rating to the state of Ohio and Montgomery County, which are two significantly larger tax bases,” Schwieterman said. “It certainly speaks to our credit worthiness and reduces the cost we have to pay to go out on the market and issue notes.”
The city took advantage of its new bond rating, as well as historically low interest rates, to issue $17.7 million in debt last week. The city issued $2.2 million in debts to refinance a portion of its municipal court building — constructed in 2005 — and $15.5 million to cover half the cost of the $29 million fire station project.
The city saved $192,000 by refinancing the court building, city finance director Nancy Gregory said. The city will pay 2.97 percent in interest rates and issuance costs. That’s lower than the 3.15 percent the city had anticipated paying before the rating was upgraded.
It was the first time the city has issued debt since 2009, when the city issued $12.5 million in bonds for a parks and recreation improvement project that was approved by voters in 2008.
“We don’t issue a lot of debt. We’ve always had a pay-as-you-go mentality,” Gregory said. “We decided to issue it now because interest rates are at a 60-year low, and we have a designated revenue stream.”
The debt service will be paid by the city’s EMS fund over a 20- year period. The EMS fund will also pay for the other half of the $29 million project.
The city is in the process of building four new fire stations. Construction is underway on a location on Far Hills Avenue, which is expected to be completed by the end of 2015. Bids have gone out for a location at Hempstead Road and David Road, but no contract has been awarded, and that location is set to be finished next year.
The city is in the early design phase for a location at Woodman Drive near Delco Park and has not yet determined a location for a final station in West Kettering.
The bond rating released by Moody was based on several factors, including the city’s financial policies, general fund reserves and property values.
The city achieved the better rating despite a devaluation trend in property values across Kettering and the rest of Montgomery County.
“This bond rating reflects the strong financial position and overall well-being of our community,” Kettering Vice Mayor Bruce Duke said. “Anytime a community can have a high bond rating, it results in saving the taxpayers money.”