Pelham’s AAA rating secures bond  

Published 1:56 pm Friday, December 18, 2015

The city of Pelham’s AAA bond rating helped secure an $11.4 general obligation bond with a 3.5 interest rate. (Contributed)

The city of Pelham’s AAA bond rating helped secure an $11.4 general obligation bond with a 3.5 interest rate. (Contributed)

By JESSA PEASE / Staff Writer

PELHAM— Standard & Poor’s Ratings Services assigned Pelham its AAA bond rating once again, according to a Dec. 11 statement provided by the rating service. Pelham is one of only four municipalities in Alabama to have an AAA rating.

This rating allowed the Pelham City Council to secure an $11.4 million general obligation bond with a 3.5 interest rate. A general obligation bond requires no collateral, being issued with the belief that the city will be able to repay its debt through taxation or revenue from projects.

“Standard & Poor’s Ratings Services assigned its ‘AAA’ long-term rating to Pelham, Ala.’s series 2015 general obligation (GO) warrants,” read the Dec. 11 statement. “At the same time, we affirmed our AAA long-term rating on the city’s existing GO debt. The outlook is stable.”

Standard & Poor’s Ratings Services attributed Pelham’s rating to the following factors:

  • A very strong economy, with access to a broad and diverse metropolitan statistical area.
  • Strong management with “good” financial policies and practices under the rating services’ financial management assessment methodology.
  • A strong budgetary performance with a slight operating surplus in the general fund and an operating surplus at the total governmental fund level in fiscal 2014.
  • A very strong budgetary flexibility with an available fund balance in fiscal 2014 at 71 percent of operating expenditures.
  • Strong liquidity with total government available cash at 82.2 percent of total governmental fund expenditures and 20.7x governmental debt service, as well as access to external liquidity the rating services considers strong.
  • An adequate debt and contingent liability position with debt service carrying charges at 4 percent of expenditures and net direct debt at 129.7 percent of total governmental fund revenue, as well as low overall net debt at less than 3 percent of market value.
  • A strong institutional framework score.

City Council President Rick Hayes said that Pelham received an AAA rating last year in response to what city advisors said was Pelham’s first ever application for a bond rating.

“Getting an AAA bond rating related to your first application is pretty rare,” Hayes wrote in a Dec. 18 email. “We are very proud of this rating and what it says about the financial management of our city.  However, we are probably more proud that this rating has enabled the city to help the Pelham (Board of Education) save a very significant amount of money that can now be spent to make sure that our students get the best education possible.”