EL PASO, Texas (KTSM) – The City of El Paso announced that the city’s bond rating received an upgrade from AA to AA+, by the Kroll Bond Rating Agency (KBRA), Limited Liability Company (LLC).
“This is incredible, historic news for our community and speaks to the tremendous recognition of the work accomplished over the last nine years. Almost nine years ago, we inherited 21 external audit findings and only had 9 days of operating fund balance. Today, we have 7 years in a row with NO audit findings and we have 91 days in our fund balance,” said City Manager Tommy Gonzalez. “This is very important for our taxpayers because we can potentially save millions of dollars in interest over the life of debt we issue or refinance. In many ways, the bond rating can be compared to an individual’s personal credit score. If you have an excellent credit score, you can get lower interest rates and refinance your home to lower your debt faster. Similarly, a strong bond rating for the city will help the city save millions of dollars for our community, and we can reduce the city’s debt.”
AA+ marks the second-highest rating an issuer can award. Some of the factors that influenced this upgrade includes the following:
- Conservative budget practices that have supported increasing financial flexibility since 2014.
- An improved fund balance that was increased by $118 million—going from 9 days of fund balance to 91 days.
- Strong pension funding progress and modest Other Postemployment Benefits (OPEB) obligations.
- A comprehensive budget process, active financial monitoring with monthly, a clearly defined reserve policy, and multi-year budgeting for operating and capital purposes.
- Moderate debt metrics balanced by very strong pension and OPEB funding progress.
- Consistent revenue growth and conservative budget practices have produced a trend of growing general fund balance each year since 2014.
- Economic strength through the post-pandemic recovery, coupled with pandemic-related federal assistance, has helped to further boost reserves.
“To receive an upgrade to our bond rating which hasn’t happened since the 1990s, an organization must have an exemplary management system, including continuous improvement in the delivery of products and services, efficient and effective operations, and responsiveness to customers and employees,” Gonzalez said. “Our journey doesn’t end with this historic bond rating upgrade, we will continue to improve our business practices, and we are committed to helping others do so as well.”
In the approximately last nine years, the city’s financial results transformed including:
- Creating stabilization funds to increase reserves and ensure long-term financial sustainability
- Implementing annual set-aside (pay-go) funding for the top priorities including streets and public safety
- Refinancing old debt that has created over $68 million in savings – which allows us to minimize tax impact while completing critical capital investments
- Upcoming recommendation to create a “Pay-For-Futures Fund” (PF3) – making the City even further financially strong over the long-term
For more information, visit www.ElPasoTexas.gov.