Three global credit rating giants on Monday reaffirmed Denver’s AAA bond rating — the highest possible score among governments and businesses — despite the crushing economic blow of the coronavirus, which has set the city back $220 million in revenue this year and $190 million in 2021.
Denver has maintained top ratings from Moody’s, Standard & Poor’s and Fitch Ratings since 2010. The records reflect the city’s credit quality and serve as an indication to investors of the likelihood that debt will be repaid on time and completely for many of Denver’s major capital improvement projects. The scorecards also impact interest rates the city pays for the bonds it issues.
“A critical role of government is the responsible stewardship of taxpayer dollars, and amid the most challenging economic conditions of our lifetime, Denver’s strong financial management and our long-term financial stability has been recognized,” Mayor Michael Hancock said in a statement.
“This is due to the sound fiscal management practices we’ve put in place, and we will continue to safeguard and maintain those practices and ensure we continue to enact sustainable, resilient, equitable oversight of taxpayer dollars.”
Moody's once again assigned the city an Aaa rating as a result of the Department of Finance’s “sound” fiscal management practices and “healthy” reserves government-wide.
“Like all cities with economically sensitive revenues, the city is also exposed to an uncertain operating environment caused by the coronavirus that could cause negative variances in actual results,” the agency stated in its report. “However, Moody’s anticipates that management's sound policies and practices will prompt further action if needed to help maintain reserves at sound levels.”
S&P gave the city an AAA rating, determining the city’s financial practices to be “strong, well embedded and likely sustainable,” adding that the stable outlook is “further supported by Denver's history of balanced operations and strong reserves that provide a cushion during this period of revenue volatility.”
Fitch Rating’s analysis, which reaffirmed the city's AAA score, echoed those of the other two giants, deeming Denver’s budget management “very strong” during times of recovery, as evidenced during the Great Recession.
The credit rating agency “expects that currently sound reserve funding and a demonstrated ability to make budgetary adjustments will allow the city to maintain a high level of financial flexibility through the current economic contraction.”
“The higher our bond rating, the less interest we pay when we issue debt, so it’s incredibly important, especially during down economic times, to maintain the highest-level ratings possible to ensure more taxpayer dollars go toward improving our city instead of paying interest on our debt,” Denver’s Chief Financial Officer Brendan Hanlon said in a release Monday. “This distinction from all three agencies allow us to invest in our infrastructure and will help us continue to create jobs for Denver residents hit hard by this pandemic.”
On Nov. 2, the Denver City Council voted to issue $170 million worth of bonds — the city’s fourth and largest issuance yet for city-led projects, and more than double the originally planned issuance, through the Elevate Denver Bond program.
The bond issuance acceleration effort, pushed by the Hancock administration, is expected to create more than 1,800 jobs and generate upwards of $130 million in labor income, according to the finance department. The goal is to stimulate the economy, a move forecasted to have a $3.8 billion impact on the region.
The Department of Finance plans to price and close on the bonds in late November and early December, the agency stated Monday.
City officials say that every $1 million the city pumps into capital improvements generates $2 million in economic output.
"Our last general obligation bond, the Better Denver Bond Program, pulled us out of the Great Recession, and we’re poised for the same strong recovery with Elevate Denver,” Hancock said in an earlier statement.
The Elevate Denver Bond Program is a 10-year, $937 million bond that was approved by voters in 2017. The goal of the program, which includes more than 500 projects, is to “enhance” the city by providing “critical” public improvements across Denver’s 78 neighborhoods.
Nearly three-fourths of the debt issuances will be directed toward construction projects citywide, according to the finance department. With the first three issuances, Elevate Denver has drawn down 40% of the nearly billion-dollar program, with more than a hundred projects underway in either design or construction.
Over the next three years, the fourth issuance of Elevate Denver and the city’s Capital Improvement Program, will invest a combined $478 million into neighborhood improvements.
The plan also allows the city to secure a lower interest rate on outstanding bonds the city issued in 2010, which is estimated to save the city $57 million, the finance department calculates.