Town Responds to Moody's Credit Report

Town Manager Joe Calabrigo responds in open letter to the community.

October 10, 2012

 

To the Danville Community,

 

On October 9, 2012, Moody's Investors Service released a statement indicating that they are reviewing credit ratings associated with lease-backed and or general obligation debts issued by 32 cities in California.  Certificates of Participation (COPs) issued by the Town of Danville in 2001 and 2005 are included in this review.

 

Now that the Town has had time to review the report issued and speak with representatives of Moody's, we are taking this opportunity to clarify the purpose for this review, and what it involves.

 

Danville has an overall credit rating of Aa1, as assigned by Moody's.  This rating shows a strong credit profile and overall creditworthiness. The Town's current Aa1 rating is not under review by Moody's.

 

The two COPs issued by the Town were separately considered and rated Aa2 by Moody's prior to their issuance in 2001 and 2005.  These financings were used to acquire and construct public parking and improvements within the downtown area, prior to the state's dissolution of redevelopment. 

 

The Moody's review is being conducted as a result of the change in the credit profile of the State of California and their concerns regarding the effect of the economy upon the State and cities in general.   Moody's representatives have characterized this as a "recalibration of the methodology" being used by Moody's to rate lease-backed debt.

 

To read the complete Moody's report click on the following link:

 

http://www.moodys.com/research/Moodys-reviews-ratings-of-32-California-cities-nine-pension-bonds--PR_257248

 

Moody's is an independent rating agency with responsibility to investors.  This review reflects their concerns regarding the condition of the state's finances and the financial condition of the typical California city.  Danville is not a typical California city with respect to its finances and financial health. The Town continues to be in a very positive fiscal condition.

 

Although the Town has no plans to undertake any additional debt financings, our overall creditworthiness remains unchanged.  With respect to the two debts under review, both are "recognized obligations" that have been approved by Contra Costa County Auditor-Controller and the State Department of Finance, and Property Tax Trust Fund revenues are being received to meet these debt service obligations without affecting the Town's General Fund. 

 

Following is a summary of key indicators that underscore the Town's overall fiscal condition:

 

  • Danville is not part of any defined benefit pension system for Town employees, and has no OPEB liabilities.
  • Danville's Statement of Net Assets shows increasing fund balances for the past five fiscal years.
  • Danville's property values have remained very strong in comparison to what has occurred throughout the State of California and Contra Costa County. 
  • Danville's sales tax revenues are at an all-time high and have increased for the past three fiscal years.
  • Danville's operating reserve is funded at over 40% of the operating budget, and the Town has set aside significant capital reserves.
  • Danville's annual budget includes 10 year fiscal forecasts which are used to plan for future needs and services and to ensure long term fiscal sustainability.
  • Danville has been recognized for its outstanding financial reporting each year since 1997, by either the California State Municipal Finance Officers Association or the Government Finance Officers Association.

 

The Town is confident that the review to be conducted by Moody's will continue to support the highest possible rating for these outstanding debts.

 

Joseph Calabrigo

Town Manager