Royal Oak’s bond rating gets boost

By Jeremy Carroll C & G Staff Writer

ROYAL OAK — Standard & Poor’s recently upgraded Royal Oak’s bond rating two levels to AA+ ahead of a planned $11.8 million capital improvement bond issue.

The city plans to issue the bonds to pay for the purchase of two properties, parking improvements, water and sewer projects, and motor pool purchases. The rating is a jump from Royal Oak’s previous rating, AA-.

He said going into the process, the city wasn’t optimistic that they would receive an increase in rating, but after meeting with Standard & Poor’s, they had a good feeling the increase would be coming.

“I didn’t expect a double bump,” Johnson said.

The rating is the highest in the city’s history, and one step below the highest possible rating of AAA. There was a time when the city had bond ratings in the B area, Johnson said.

In its report, Standard & Poor’s said “strong management practices” and “general fund reserves” were main contributors to the increase in the bond rating.

“The rating is further supported by the city’s … healthy financial position, including very strong general fund reserves and good operating results despite dropping revenues,” the report said.
Standard & Poor’s also approached the subject of a possible tax increase on residents in its report.

“In the event that revenue projections do not improve, the city has several plans to preserve fiscal balance,” the report read. “Management is considering approaching the voters with a millage increase in order to address falling property tax revenues. On the expenditure side, plans include further reducing the staff through attrition as well as possibly decreasing city services.”

Standard & Poor’s also upgraded the city’s management practices to “strong,” its highest ranking. It’s the only rating agency that actually rates management.

The ratings for Moody’s and Fitch remained unchanged. The city has a rating of A1 from Moody’s and AA- from Fitch.

“This is very good news,” said Mayor James Ellison in a statement. “Better bond ratings mean lower interest cost on our bonds. We’ll be seeing the benefits of this rating upgrade every time we make an interest payment, for the next 20 years.”


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