City's Bond Credit Rating Could be Reduced, Analysts Warn

The City of Manassas Park’s bond credit rating could very likely be reduced in light of the recent recession and the fact that the city’s fund balance has been drawn down,  Manassas Park city manager Jim Zumwalt told city council Tuesday.

 Zumwalt said he and the city’s finance director, Gary Fields, had a conference call Tuesday with an analyst from Standard & Poor’s, one of the major independent firms that rate the financial strength and soundness of bond issuers—such as local governments—and their ability to pay bonds as agreed.

 “They have had us under a watch as they have had many jurisdictions as a result of the impact of the recession on local government,” Zumwalt told council Tuesday. “They have considered moving our bond rating down a notch. They were very concerned that the city’s fund balance was drawn down.”

 Manassas Park adopted a financial policy which mandates that the city’s  reserve be equal to 15 percent of the general fund operating budget.

 That reserve is considerably lower than 15 percent, as it is currently at about  5 percent which concerns Standard & Poor’s analysts, the city manager said.

 In February, city council agreed that they would earmark proffer revenue from the pending development projects in order to build the city’s general fund balance up to 15 percent.

 The action taken in February by the governing body was in the form of a consensus action, but Zumwalt asked Tuesday that council make it a formal motion and vote on it.  A carried motion serves as proof to Standard & Poor’s that the city has made a commitment to increasing  its  fund balance.

 It’s ultimately Standard & Poor’s decision whether to reduce the city’s rating, Zumwalt said.  The analyst will write a report and take it to a committee within the firm who will make a decision about the rating.

 “There’s a good chance it will still go down a notch,” Zumwalt said.

 The chances of it going down would have been higher if Fields hadn’t put on such a great financial presentation for the analyst, Zumwalt said.

 The governing body voted Tuesday in favor of using the proffers to increase the city’s fund balance.

It’s  ultimately Standard & Poor’s decision whether to reduce the city’s rating, Zumwalt said.  The analyst will write a report and take it to a committee within the firm who will make a decision about the rating.

“There’s a good chance it will still go down a notch,” Zumwalt said.

The chances of it going down would have been higher if Fields hadn’t put on such a great financial  presentation for the analyst, Zumwalt said.

The governing body unianousmouly Tuesday in favor of using the proffers to to increase the city’s fund balance.