By Joel Hall
The City of Riverdale recently secured more than $19.4 million in Certificates of Participation (COPs) through the Georgia Municipal Association (GMA) to finance the first phases of its Town Center project.
Thanks to favorable credit scores from Moody's Investors Service, as well as Standard & Poor's Ratings Services, the city has been able to lock in a low, five percent interest rate throughout the life of the loan.
Moody's recently assigned an A3 rating to the city's COPs for Town Center and an A2 issuer credit rating. Standard & Poor's, in turn, assigned an A+ rating to the COPs and an AA- issuer credit rating.
The development, which Riverdale broke ground on late last year, is slotted to bring a mixture of public amenities, businesses, and residential developments to the city. The more than $19.4 million in COPs will fund the construction of a new multipurpose community center, a city hall complex, and an outdoor amphitheater.
Iris Jessie, Riverdale's city manager, said the Town Center project represents the city's first foray into the bond market. She said the high marks given by Moody's and Standard and Poor's allowed Riverdale to secure the COPs and move forward with the construction phase of the development.
"The COPs, it's like a deal between the city and Georgia Municipal Association," Jessie said. "It's like a lease ... they own the property until it is paid for. We've been developing this as a source of financing for this project for a while, but it just came into fruition in February when the bonds were sold. The city was able to issue COPs, because we were credit worthy, based on our financial standing and management."
Moody's cited Riverdale's diverse tax base, its strategic proximity to the airport, the city of Atlanta, and Ga. Highway 85, as well as its "solid financial position" as justification for its rating. Moody's analyst Alicia Stephens noted in her report that the city has implemented "prudent management practices" and maintained "healthy fund balance levels" for several years.
"Since fiscal 2004, conservative budget assumptions and structurally-balanced operations have supported the maintenance of general fund balances at an ample 38 percent of average annual revenues," Stephens said. "Notably, management also implemented broad measures to maximize organizational efficiencies during the same period, resulting in a 15 percent decline to general fund expenditures from fiscal 2004 to fiscal 2007, despite a moderate gain in the city population during the same period."
Standard & Poor's report said that "Riverdale has historically maintained a very strong financial profile" and that "the unreserved fund balance was $4.1 million at fiscal year-end 2008, which we view as a very strong 41.3 percent of expenditures."
Jessie said being able to move forward with construction at this time will make the project more affordable, due to the decreased demand for construction materials.
"A year ago, everybody was talking about how expensive it was to purchase steel," she said. "Now, with the downturn in the economy, the materials are much cheaper."
Walter Johnson, a senior managing consultant at Public Financial Management, Inc., in Atlanta, is Riverdale's financial advisor for the Town Center project. He said the city's recent credit ratings rival those of larger cities, such as Atlanta.
"When you have a city the size of Riverdale, it is unusual to garner a credit rating that high," Johnson said. "Larger cities are generally more highly rated than smaller cities" because "you have more properties in that area."
"It definitely lifts the City of Riverdale's profile overall," Johnson added. "That's good for the city's overall economy and its prospects for future growth."
Doug Manning, Riverdale's public works and community development director, said the credit ratings mark "a new chapter" for the city.
"From a development standpoint, the city is now able to be in a financial posture where we didn't have a financial posture before," he said. "As with any rating system, the city will be developing a history, a trademark in how it handles its financial responsibilities. To the development community, that is a wonderful thing, because it says to them that we are financially solvent and we can handle those responsibilities."