'AAA' Bond Rating $31.5 Million Savings
S&P Global Ratings has assigned a new “AAA” long-term rating to the City of Glendora Pension Obligation Bonds, with a “Stable” outlook. “AAA” rating on the POB bonds means the City will see greater savings on their pension costs over the next 25-years,” said June Overholt, Finance Director.
The bond proceeds will be used to refund the City’s outstanding unfunded actuarial liability which is currently amortized over 27 years at a rate of 7%. With the recent pricing of the bonds at a True Interest Cost (TIC) of 2.81% we estimate pension savings of $31.5 million over the next 25-years.
The rating reflects S&P’s view of the City Financial Strength of strong economic fundamentals, characterized by:
- Very strong Economy, with access to a broad and diverse metropolitan statistical area (MSA);
- Very strong management, with strong financial policies and practices under one Financial Management Assessment (FMA) methodology; and
- Strong budgetary performance, with balanced operating results in the general fund and an operating surplus at the total government fund level in fiscal 2018.
According to S&P, “the City’s POBs are eligible to be rated above the sovereign because we believe the City can maintain better credit characteristics than the U.S. in a stress scenario.”
“I want to applaud the Council and our excellent finance staff for pursuing the Pension Obligation Bonds. Their hard work has resulted in the acknowledgement of Glendora being only 1 of 15 cities out of 482 in the entire state that have a AAA bond rating on debt outstanding. The cash flow savings are projected at $31.5 million over 25 years which will be re-invested in our community.” Councilmember Mendell Thompson continues to state. “This timely financial decision is also a reflection of our Cities superb financial position, which continues to allow Glendora to be the Pride of the Foothills.....and an excellent place to....Live...Work...and Play.”
Mayor Judy Nelson commented, “Thanks to Glendora’s former and current Council and management staff who have consistently prioritized working with a balanced budget and a strong reserve. We’re delighted that our long-time fiscal prudence has paid off in a AAA rating with a favorable interest rate and greater savings over the time of our new Pension Obligation Bond.”