By David Pendered
The city of Atlanta is “showing signs” that it is rebounding from the recession, according to a new report from Moody’s Investors Service.
Atlanta’s economic recovery is fueled by new developments such as Buckhead Atlanta. Pictured here installing an honorary brick on opening day were Atlanta Mayor Kasim Reed (center), former Atlanta Mayor Sam Massell, and Dene Oliver, CEO of Oliver McMillan, the development company that opened Buckhead Atlanta. Credit: Oliver McMillan
Among the signs Moody’s identifies: The tax base is inching up; foreclosures are down to pre-recession levels; the unemployment rate is still stuck above 10 percent, but city officials attributed it to people moving here to look for work rather than to locals unable to find a job.
The report could be a guide in gauging the economy in other parts of the region, though Moody’s did examine only the city of Atlanta in order to rate the credit of a $60 million bond package Atlanta plans to sell Oct. 28.
Incidentally, the report notes that the city’s planned sale of $150 million in bonds to improve roads, sidewalks and other infrastructure would result in a debt burden that is, “expected to remain manageable.” Atlanta voters are to face that referendum in March 2015.
Here are four snippets that suggest the report Moody’s, issued Oct. 10, could be viewed as a barometer for the region:
- “The City of Atlanta remains the focal point for one of the fastest growing metropolitan statistical areas (MSA) in the nation, encompassing approximately 5.3 million people across 28 counties, and the city sits at the center of a leading national economic hub for trade and transportation….
- “The Atlanta MSA is anchored by a diverse and mature business base that includes the headquarters of 13 Fortune 500 companies (the third highest concentration in the country) and the Hartsfield-Jackson Airport … which is the busiest airport worldwide (47.5 million enplanements in fiscal 2013).
- “The city’s position as a trade and transportation center and growing identity as a travel destination has attracted continued corporate investment….
- “Following five years of declines through fiscal 2013, which led to a 22.6 percent decrease in assessed values, the city’s tax base digest has begun to rebound, increasing by 1.4 percent and 3.5 percent in fiscal years 2014 and 2015, respectively.”
The report also includes a number of observations about the city’s fiscal governance under Mayor Kasim Reed’s administration.
The unemployment rate in metro Atlanta has increased and the civilian workforce has decreased since March. Atlanta officials attribute the city’s unemployment rate, of more than 10 percent, to people moving to Atlanta in search of work. Click on image for a larger version. Credit: U.S. Bureau of Labor Statistics
Perhaps most significantly, Moody’s anticipates raising the city’s credit rating within the next year or two. Moody’s telegraphed that prospect by raising the city’s credit outlook to positive from stable.
Moody’s identified several initiatives of the mayor and Atlanta City Council that contribute to a positive financial footing. They include:
- A current general fund balance of $138.2 million, which stems from expenditure reductions and a close eye on revenues other than property taxes;
- New construction that will yield an anticipated $4 million in property taxes in Fiscal Year 2015, which ends June 30, 2015;
- Pension reform, completed in 2010, that eventually will address an unfunded pension obligation that is “high,” while police and fire pension funds are, “moderately funded at 69 percent.”
Atlanta intends to use the proceeds of the upcoming sale to refinance three bonds that were sold to support the city’s general obligations – in 2005, 2007, and 2008. The city intends to sell two bond packages, one in the amount of $19 million and the other at $41 million.
The $19 million bond is expected to save 2.4 percent of the amount refinanced in order to repay a portion of bonds sold in 2007 and 2008. The $41 million bond is expected to save 5.5 percent of the refunded amount of bonds sold in 2005.
Neither of the two upcoming sales will extend the maturity date of the debt – which means the city isn’t seeking to extend the payback period in order to lower the amounts of its scheduled payments.
Moody’s retained the city’s credit rating of Aa2. That level is third from the top in Moody’s system, which provides a total of 10 categories for its investment grade ratings. Higher credit ratings result in lower costs to borrow money, because investors have a greater confidence they will be repaid.
