Politics & Government

City Manager Says AAA Rating a Sign of Strong Financial Management

Fitch Ratings agency recently reaffirmed the AAA status on Birmingham's five general obligations bonds, a sign the city manages its finances well.

Things are looking good for Birmingham's financial outlook, as Fitch Ratings recently affirmed the AAA status on five of the city's general obligation bonds.

General obligation bonds are issued when the city borrows money for special projects. Birmingham's general obligation bonds range from $1.48 million to $8.8 million, with the most recent bonds issued to pay for park renovations.

According to City Manager Bob Bruner, the AAA bond rating is a sign of Birmingham's strong financial management and years of fiscal responsibility.

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"Birmingham's financial performance results from strong and proactive management, including long-term budgeting and capital planning," the report reads. "The city maintains good financial flexibility, including sizeable fund balances, operating tax margins and adjustable discretionary spending."

What does this mean for Birmingham? Ratings for everything from municipalities and businesses are issued by three credit agencies, Bruner said — Fitch, Standard & Poor's and Moody's.

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AAA ratings by any one of these agencies means the city receives the best possible interest rates when they want to refinance or borrow money, Bruner said.

A history of strong financial management was cited as the chief reason for the AAA rating. According to the report, Birmingham had a general fund ending balance of $13.1 million in fiscal year 2011.

In FY 2012, Birmingham's budget calls for an estimated general fund balance of $12.1 million — only $1 million less than the year before.

However as of Jan. 31, general fund expenditures were 3 percent under budget due to stronger-than-expected revenues, the report reads. In addition, the city has seen an increase in license, permit and inter-governmental revenues in 2011-12, while several empty staff positions have gone unfilled.

Going forward, the report says the biggest challenge the city faces financially is the continued decline of property values.

Property values declined by 7.2 percent and 4.9 percent in 2010 and 2011, respectively, the report reads. In 2012, taxable values are expected to remain the same while growing only 1 percent in 2013 — a figure based largely on market improvement and increased building permits.

These figures match the city's five-year financial forecast, .

"The financial forecast that has been presented this year is dramatically improved from what has been shown in the past year," the report, as presented by city finance director Sharon Ostin, reads. "The city's willingness to conservatively forecast, and then to respond, has enabled the city to weather the sharp decline in property tax revenue since 2007."


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