City of Lufkin improves its bond rating - KTRE.com | Lufkin and Nacogdoches, Texas

City of Lufkin improves its bond rating

LUFKIN, TX - Smart budgeting and a diversified economy have led one of the nation's top "grading" agencies to give Lufkin high marks.  Standard & Poor's Ratings Services has elevated its standard underlying rating (SPUR) on the City's general obligation (GO) debt to AA- from A+.  Standard & Poor analyst Sarah Smaardyk says, "Lufkin's improved rating is a reflection of its conservative budgeting practices that have in turn produced consistently stable fiscal results."

Lufkin sought evaluations from S & P and Moody's Investor Services as the City prepared to issue $17.4 million in certificates of obligation bonds for tax, waterworks and sewer system projects. $15 million of that goes for the acquisition of Abitibi Bowater's water assets. The balance is for sewer improvements. S & P raised Lufkin's already positive A+ rating to AA- . City Finance Director Doug Wood says, "That was an unexpected feather in our cap!"   Moody's Investor Services upheld Lufkin's A1 rating.


What does S & P's improved rating mean? Smaardyk says, "When the City goes to market their bonds they will get a lower interest rate and in turn a larger pool of investors who might be interested in purchasing bonds." Mayor Jack Gorden adds,  "This is a validation of something we already know which is that Lufkin's financial position is very strong. It speaks well of our City, its governing body and administration. The S & P analysts don't just look at the ‘numbers' they look at what's behind the ‘numbers'". Gorden adds, "Even with recent layoffs at Lufkin Industries and Citation's closure, our unemployment rate is just at 5.3% still below the state and national averages."  Standard & Poor's also cites Lufkin's role as a regional retail, medical and service center, the City's moderate overall debt burden, and Memorial Health Systems' expansion as reasons for the improved rating.

The AA- rating also reflects management practices within the City.  The City closed 2007 with an unreserved general fund balance of $11.3 million or a very strong 45% of expenditures. That's well above the City's 25% policy.  2008's preliminary numbers are very similar.  S&P says the City's 2009 budget is balanced with a possible surplus at year's end. 

S & P also revised Lufkin's management practices to "good" from "standard" under its Financial Management Methodology.  According to S & P, "This is another indication that the City has good financial management practices in most areas of its operations."  Finance Director Doug Wood says, "For a small city we were happy with our previous rating.  This upgrade truly affirms that our pro-active budget monitoring when revenue is ‘soft' and our strong budget balances have strengthened the City's long-term financial stability."

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