IndyStar.com Columnists John Ketzenberger
April 8, 2007

John Ketzenberger
Bond rating warning sends chill through city’s finances

Bond-rating agency reports typically are dry-as-dust reading, but a recent Standard & Poor’s report was pretty juicy.

It revealed the city’s AAA bond rating is in peril. If it falls, it will cost the city millions more to borrow money and prompt questions from lenders.
The respected analysts put the city’s top-shelf credit rating on “credit watch/negative,” which means if things don’t change the city’s rating will fall.
That got the attention of city Controller Bob Clifford and Indianapolis Bond Bank chief Barbara Lawrence. Indianapolis is one of just five U.S. cities with a top ranking, including Columbus, Ohio; Charlotte, N.C.; Minneapolis; and Omaha, Neb.
“It could impact our cost of capital in a pretty significant way,” Lawrence said. A recent $100 million pension obligation bond, for instance, would have cost $750,000 more with a lower credit rating. So a downgrade could add $15 million to the cost of a $2 billion bond issue the city is contemplating.
Then there’s the loss of flexibility. When the city needed money to pay for more family assistance, “the deal got done in a day,” Clifford said. “Chase did it because we were triple-A and they knew we were good for it.”
The S&P report notes that Indianapolis relies too much on property tax. That’s bad because the city is nearly built-out and there’s little growth in assessed valuation. Growing deficits and $450 million in pension costs on the horizon trouble S&P.
S&P says the solution is further government consolidation and the ability to raise income taxes. You’ve often heard that from Mayor Bart Peterson, who needs state lawmakers’ approval.
Some help may be on the way. Sen. Luke Kenley, R-Noblesville, sponsored a bill that included part of the additional income taxes the city sought. Kenley expressed a willingness to consider other alternatives as the state budget moves toward final passage. He knows what it’s like to lose credit. The state’s rating fell in 2004.
But nothing is certain and that worries the likes of S&P. City officials, too. “It’s a coveted rating, and we’ve fought to keep it,” Lawrence said. The city gained the rating in 1998.
“If we lose the rating,” Clifford said, “it’s not going to come back easily.”

Stand back–the IndyUndercover folks, all eight of them, posting and reposting ad nauseum, are going to whine incessantly about losing their freaking back pay.

As if they’ve totally forgotten they voted against the city’s contract offer. Ergo, contract gone, new contract voted down, retro pay gone.

If the city had caved to that, I’d have beaten a path to my councillor’s door.

The police deserve a good contract. But they don’t get mulligans in negotiations.

Let’s hope this ends the sniping.

Yeah, riiiiight.