January 13, 2020 – West Bend, WI – Former West Bend Mayor Kraig Sadownikow said the news release from the City of West Bend, today January 13, 2020, is great news for the community.
Sadownikow said the effort took a lot of hard work and commitment.
The City of West Bend announced Standard & Poor (S&P) Global Ratings has assigned its ‘AA’ long-term rating to the City of West Bend series 2020A taxable general obligation (GO) community development bonds.
The AA rating declares the City to be “at a very strong capacity to meet financial commitments due to its leadership, organizational policies, and financial stability. It will position the City to receive the best possible interest rates on future borrowings.”
“The City of West Bend has made a tremendous commitment to its short- and long-term financial wellness,” said City Administrator Jay Shambeau. “This improved rating reflects the hard work and dedication of City Council members, the Finance Department staff, and our department head team.“
Sadownikow said the bond rating issue goes back to 2011 when he was elected and met with a Washington County Supervisor.
“That supervisor said the city is on a collision course with a financial tsunami,” said Sadownikow. “It took about a year and a half to figure out what he was talking about …. but he was exactly right.”
Sadownikow praised the West Bend Common Council for it’s aggressiveness and dedication to “reduce debt and increase reserves.”
“Moody’s was the City’s bonding agency for more than 20 years and during our annual conference calls their reps would lay out what the City had to do to increase its bond rating,” he said. “We did that but I didn’t feel the City was getting the respect it deserved.”
In 2019, Sadownikow threw out the challenge for the City to change rating agencies and that’s where S&P comes in.
“S&P looked at the information and said you guys are a lot stronger than Moody’s was giving you credit for and that’s where we are today,” he said.
Details in the latest S&P report upgraded the City’s bond rating, last conducted by Moody in 2019, from Aa3 to AA. In summary, the rating reflects S&P’s assessment of the City’s:
- Strong economy with access to a broad and diverse metropolitan statistical area (MSA). The city has a projected per capita effective buying income of 98.3% of the national level and per capita market value of $93,945. Overall, the city’s market value grew by 6.9% over the past year to $3.0 billion in 2020. The county unemployment rate was 2.5% in 2018.
- Strong management with good financial policies and practices under our Financial Management Assessment (FMA) methodology. West Bend conducts line-by-line budgeting, relying on historical information to determine trends.
- Very strong budgetary flexibility with an available undesignated fund balance in fiscal 2018 of 28.3% of operating expenditures.
- Very strong liquidity with total government available cash at 78.8% of total governmental fund expenditures and 3.3x governmental debt service, and access to external liquidity we consider strong.
- Adequate debt and contingent liability profile, with debt service carrying charges at 23.9% of expenditures and net direct debt that is 128.7% of total governmental fund revenue, as well as low overall net debt at less than 3% of market value and rapid amortization, with 89.3% of debt scheduled to be retired in 10 years.
- Strong institutional framework score.
“What this does is put the City in a position where raising taxes at random and increasing debt at random puts the City right back where it was,” he said. “What it takes is some time, energy, and question asking to understand what made us strong, because we know what made us weak.”
Questioned whether the AA rating is now good enough so all the roads can be fixed in West Bend, Sadownikow said…
“Can we finally fix the roads? If that means someone’s going to say let’s borrow $20 million, I would say no,” he said. “The amount of money the City is putting into roads is potentially over the next three years higher than it’s ever been. It allows the City to invest more into roads but it has to be done in an intelligent manner or we end up right back where we were.
“The report recognizes the reduction in debt; that debt is more manageable and more sustainable than it was in the past. It also recognizes that the City’s reserves are at a really comfortable level and that’s what gives bonding agencies comfort is knowing a community is financially strong,” said Sadownikow.
“If taking on a bunch of debt willy nilly and to raise taxes by taking on a bunch of willy-nilly debt, I would say that’s not a good solution and it would put the City right back onto a path of a financial tsunami. I’m super proud the common council took a position seven years ago to put some mechanisms in place to put the City in the position it’s at right now.”
“The Finance Department is very pleased with the upgraded bond rating,” said Finance Administrator Carrie Winklbauer. “The City of West Bend is continuing to move in a positive financial direction.”