In connection with an expected December bond offering, the City of Madison sought rating updates from S&P Global Ratings (formerly Standard & Poor’s) and Moody’s Investors Service. The upcoming bond issue finances the construction of major improvements to the I-565 interchange serving Toyota Field and the Town Madison development, as well as refinancing debt associated with the municipal infrastructure at Town Madison.
Recently, S&P and Moody’s released their ratings for the City of Madison with “AA+” and “Aa3”, respectively. The S&P rating affirms the AA+ mark the City has maintained since 2013, while the Moody’s rating represents a slight downgrade from the previous Aa2 rating. Madison remains one of the most highly-rated municipalities in Alabama.
Rushton Rice, president of the City’s financial advisory firm Rice Advisory LLC, attributed Moody’s action to new rating criteria adopted November 2nd of this year. “Moody’s new rating methodology, which changes leveraged debt scoring from 10% of the overall score to 30%, really penalizes financially strong cities like Madison who wholeheartedly support public education,” says Rice.
Madison City Council President Ranae Bartlett mentions Council remains focused on the long-term benefit this project will provide Madison. “Using Rice Advisory’s projections we should be able to retire these bonds in 10-12 years, setting Madison up for long-term financial success.” Bartlett adds, “Our Madison City Schools also benefit greatly as all education funds from both Town Madison and the recently annexed Publix on Highway 72 immediately are added to their general fund.”
Moody’s cites Madison’s “strong resident income levels, robust economic growth and very strong reserves and liquidity” in its report. S&P’s report notes Madison’s “very strong economy, very strong financial management policies, historically strong budgetary performance and maintenance of sizable reserves” among others. Both rating agencies made note of the City’s high debt relative to similar-sized municipalities, however Moody’s new rating methodologies penalize cities more for their use of leverage than the old guidelines. In response, Rice adds, “If you set out to have the best public school system in the country, investment in infrastructure is critical to the overall success.”
Madison Mayor Paul Finley states, “When issued later this month, the bonds will provide 100% of the funding for the final phase of the I-565 interchange. This includes ‘flyover’ ramps to move westbound traffic safely and efficiently in and out of Toyota Field and Town Madison, along with easier access from Redstone Arsenal Gate 7.”
