Portland's credit rating improves, potentially saving costs for city projects
Photo / Renee Cordes
Standard & Poor's said its upgraded long-term rating for Portland reflects the city's strong property tax base growth, a recent revaluation and desirable location.
Standard & Poor's has raised its rating on Portland's municipal debt, making it cheaper for the city to sell bonds to finance projects and services.
The ratings agency on Friday raised its long-term grade on Portland's previously issued general obligation bonds from "AA+" to "AAA."
S&P also placed an AAA long-term rating on $52 million in new debt being issued Tuesday in the form of 20-year general obligation bonds. Proceeds will pay for renovations at four of Portland's 10 public elementary schools as well as general fund and sewer fund capital needs.
Brendan T. O'Connell, the city's finance director, told Mainebiz that the ratings upgrade should help Portland shave off 10 to 15 basis points in interest costs on the new $52 million issue, yielding savings of $520,000 to $780,000 over the life of the bond. A basis point is one-hundredth of a percentage point.
"The move to 'AAA' is unique in that it also increases demand for Portland's bonds," he said, noting that only about a dozen municipalities in Maine make that category.
The new bond pushes Portland above the $400 million mark in total debt outstanding, according to O'Connell. He said the city will be paying off significant principal on a number of bonds this year, including payment of $10.6 million in pension obligation bond principal in June.
Other upcoming borrowing plans include $25 million to $30 million this summer for the city's Back Cove West Storage conduit project and another estimated $30 million in 2023, related to the city's capital improvement plan and one elementary school renovation.
The S&P upgrade comes as interest rates are rising nationwide in reaction to the jump in inflation.
Asked how the city is coping with rising rates, O'Connell said, "We make sure we adjust our own investment portfolio as rates rise and fall so the interest we're receiving on our assets helps to offset the interest we're paying on our liabilities."
In Friday's research note, Standard & Poor's said the long-term rating move reflects its view of Portland's strong property tax base, subsequent revaluation and continued development stemming from a desirable location.
"In our view, the city's debt profile is manageable even after accounting for additional debt issuances planned," the report said.
The report also cautioned that Portland's environmental risks are elevated due to the city's seaside location and noted that migration and relocation from other countries has resulted in additional affordable housing needs. Additionally, S&P said it considers the city's governance risks in line with the sector standard but plans to keep tabs on those risks as they evolve.
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