Las Cruces gets bond-rating boost

The city's gross receipts tax bond rating has been upgraded by a leading international credit ratings organization, despite a slight drop in tax collections.

Fitch Ratings Ltd. increased the bond rating from A+ to AA- mostly based on the city's good financial standing.

City Financial Services Director Mark Sutter said Friday he was "very pleased" with the bond rating upgrade.

"The rating upgrade reflects in part a recognition of the remarkable recovery of the reserves of the city's general fund from 2000 to 2009," Sutter said. "The primary drivers of this recovery have been stable growth in GRT -- reflecting the robust local economy -- and fiscal restraint exercised by the City Council ... . "

Sutter explained that the upgrade is significant.

"Changes in underlying credit ratings are very important right now for municipalities because of the demise of municipal bond insurers," he said. "In the recent past, municipalities could easily and relatively cheaply purchase bond insurance to enhance their bond ratings to ensure buyers would be interested and interest rates would be reasonable. In two short years, the severe disruptions in the world of finance have seen the number of companies providing this

insurance fall from seven to only one -- presumably, this means that insurance will become less available and more expensive to the municipalities if they need to improve their credit worthiness to potential investors. Further, the demise of the bond insurance companies has provided a wake-up call to investors that underlying credit ratings are still very important in and of themselves."

The upgrade comes at a time when the total amount of gross receipt taxes collected by the city during the first three months of the 2010 fiscal year is nine-tenths of 1 percent lower than at the same time last year. City Budget Manager Dick Gebhart said GRT collected from the construction industry continued to drop and the city's retail trade was slightly down.

"With the exception of health care and food distributions, the report was generally weak across the remaining industries," said Gebhart, of the $5.91 million in gross receipts tax revenues reported to the city in September by the New Mexico Department of Finance and Administration.

Despite a volatile economy, City Manager Terrence Moore said he is proud of the upgrade in the city's bond rating.

"This accomplishment is likewise yet another example of success not commonly being experienced in other municipalities across the nation," Moore said. "It's a tribute to city staff who has worked collectively to achieve this status and to City Council for its diligence to keep costs down while maintaining services for all residents. As such, our community enjoys a strong and improving reputation in the national financial market."

But Moore added there are no plans to seek financing with the higher bond rating. Instead, the plan is to continue to closely monitor city finances, keep a close check on spending while trying to increase reserve funds.

"Until we know this (global economic recession) is all over, I'd recommend that the city be very careful about what it's spending money on," said Arlene Richmond, a retired engineer who has lived in Las Cruces the past three years. "The city clearly has a lot of needs and selling bonds can help raise money to fix some of that. But now isn't the time to be doing that. Let's be careful, smart, with our money."

Steve Ramirez can be reached at sramirez@lcsun-news.com; (575) 541-5452.

Better bonding

-- The city's bond rating has increased from A+ to AA-.

-- The bond rating upgrade was announced by Fitch Ratings Ltd., an international credit rating agency.

-- The AA rating means that city government's finances are considered by Fitch Ratings to be in quality condition.

-- Only a AAA rating is better.