Two newly awarded bond ratings position Schenectady Metroplex Development Authority on a solid path to savings.
Standard & Poor’s Ratings Services on Tuesday, Aug. 7, issued a new “A+” rating for Metroplex’s serial bonds totaling $13.6 million, which is the highest upper medium grade bond rating. Moody’s Investors service also assigned an equal rating of “A1” on Thursday, Aug. 9, to the serial bonds. Both ratings represent the authority holds a low credit risk and has a strong capability to repay debt.
“They are good, solid bond ratings,” Metroplex Chairman Ray Gillen said. “People look at the bond rating as a good quality bond.”
Gillen said the bond ratings reflected well on Metroplex’s management and of the direction the authority has taken on economic development countywide.
“We continue to invest in new projects that in turn create additional tax base and new jobs,” Gillen said in a statement.
Metroplex service districts cover most of the City of Schenectady and other towns in the county. Niskayuna expanded the authority’s service area earlier this year. Metroplex has approved project grants, expenditures and loans totaling more than $143 million, with it funding 155 façade grants countywide, Metroplex Board of Directors member Bill Chapman previously said.
Also, S&P credited the authority for adding more than 1.2 million square feet of new or renovated commercial space to downtown Schenectady, revitalizing the “cultural district” and securing The Golub Corporation’s corporate headquarters.
“Each of these projects increase the number of workers, students, area residents and visitors frequenting the downtown area,” S&P said in its report.
The recent rating will help Metroplex as it seeks to refinance its debt, with Moody’s projecting a savings of 5.5 percent and S&P slightly higher at 5.7 percent.
Gillen estimated savings would total more than $500,000 annually and S&P roughly estimated the savings could total $747,500.
Gillen said Metroplex is likely to announce a bond sale date soon. The bond ratings were updated due to the impending bond issuance.
Both agencies credited strong sales tax growth and a strengthening economy for the ratings issued.
“Sales tax revenues have rebounded to the highest levels the county has ever experienced,” Moody’s said in its report. “Management forecasts that revenues will grow at 2.5 percent annually going forward, a somewhat conservative number given that fiscal 2012 receipts are 3.1 percent over fiscal 2011 year to date.”
Metroplex receives 0.5 percent of the county sales tax, of which 70 percent is used for projects and the remaining 30 percent is handed over to municipalities. The local share of funding is distributed according to the population of each municipality.
The county in June 2003 had increased the sales tax by 0.5 percent to account for the authority’s funding. Originally, sales tax was only increased by 0.25 percent.
Sales tax totaled almost $7.8 million in fiscal 2011, according to S&P, and since the authority was created in 1998, the county has held “healthy sales tax revenue increases,” with three years holding declines.
Fiscal 2008 held the most recent sales tax revenue decline, totaling 6.1 percent, which S&P attributed to the national recession. Since 2005, sales tax revenue has increased 12.5 percent. Both reports said the authority “conservatively” estimated revenues to increase in fiscal 2012, falling around $8 million.
Metroplex had projected sales tax revenue to increase by 2.5 percent, but fiscal 2012 earnings already exceed last year’s earnings to date by 3.5 percent, Moody’s said.
Moody’s projected the county’s economy “will continue to strengthen as a result of economic development and a reversal of population decline.” Moody’s report also said the county holds an unemployment rate of 8 percent as of May 2012, which is lower than the state average of 8.6, but is “double the historical averages for the county.”
Both reports also accounted for Metroplex’s plans to issue between $7 to $10 million in new debt by the summer of 2013. Gillen said $5 million would go towards General Electric’s advanced manufacturing battery facility in Schenectady. The remainder accounts for “additional projects” Metroplex is looking at, Gillen said.
