• Originally published October 21, 2009 at 5:12 p.m., updated October 22, 2009 at 12:35 a.m.

The city received some good financial news last month that has already saved taxpayers more than $1.7 million.

On the same evening the city lowered its tax rate to 64.5 cents (a reduction of ½ cent), the city sold $26.3 million in bonds, most of which will pay for the next phase of the Laurent Street Reconstruction Project and the Sam Houston Street Reconstruction Project. This is the usual way the city pays for major infrastructure projects, as approximately 66 percent of all capital improvement projects are paid for by selling bonds, and one-third is paid from operating revenues and fund balances.

As part of the sale of these bonds, the city made a financial presentation to two major rating agencies: Standard and Poor's Rating Services and Fitch Investor Services. These agencies also extensively reviewed the past five years of the city's audited financial statements, last year's adopted budget and the proposed budget for 2010. These agencies also examined the proposed bond sale and the impact of that sale on the city's financial position. Finally, they conducted an interview with members of the city's management team to further inquire into city management policies, practices and procedures.

Here's the good news: The bond agencies liked what they saw. As was announced the evening the tax rate was adopted, Standard and Poor's increased the city's tax-secured bond rating (basically our credit rating) from an already impressive "AA-" to a full "AA" rating. As the city's financial adviser indicated that night, this "AA" rating not only provides the city with bragging rights enjoyed by very few cities of our size, it means real money to the citizens of Victoria. Because of this high bond rating, the city was able to sell its debt without the use of municipal bond insurance. The estimated savings on the insurance alone was cited at more than $230,000. However, the biggest advantage of the increased bond ratings was the investors' willingness to buy the city's debt at lower interest rates. That means that investors were willing to buy the Victoria bonds at a lower profit because we are such a good risk.

There was even more good news. Because of both the knowledge and experience of the city's executive staff and the reputation the city holds in the financial markets, the city sold the largest portion of the debt ($23 million out of the $26.33 million) as "Build America Bonds" or "BABs." These bonds are new in the marketplace and receive a large subsidy on the interest cost from the Federal Treasury Department.

Utilizing this new technique and its newly increased bond ratings, the city was able to sell $23 million of the bonds at a 3.72 percent fixed interest rate for the life of the bonds. The city's financial adviser calculates that this technique saved the taxpayers of the city $1.5 million over the life of the loan when compared to the traditional tax-exempt bond rates available on that date. I agree with the financial adviser, this is real money.

How common is this high bond rating? There are only 32 cities in the entire state of Texas that enjoy a "AA" rating and only five are the same approximate size as Victoria. In its rating report, Standard & Poor's stated it was raising the city's ratings "based on the city's continued stability due to its role as a regional economic hub, leading to its consistently strong financial performance and ongoing employment base diversification." It went on to cite "Good financial management practices, including the maintenance of strong reserves and a stable tax rate" and "Victoria's management practices are considered 'good' under Standard and Poor's financial management assessment methodology." Another comment was "Victoria's financial performance remains very strong, in our opinion."

While the second rating agency, Fitch Investor Services, reconfirmed its rating of AA-, its report likewise had laudatory comments on the city and its management, including "Victoria's financial profile is solid, as evidenced by operating surpluses, healthy reserves and conservative budgeting practices."

Earning this recognition does not happen by accident. We have a long history of strong financial management. We have dedicated and experienced staff who understand and perform their jobs very well. They consistently engage in long-term planning and implement those plans effectively. Let me give this example: The city over the last five years has implemented approximately $130 million in capital construction projects for streets, drainage, water and wastewater improvements. Over these same five years, we have lowered the property tax rate from 70 cents to 64.5 cents. The physical condition of our city continues to improve and our financial condition remains stable, as the rating agencies have confirmed, and therefore we should be proud of our city, its reputation, its professional management and its accomplishments.

Will Armstrong is the mayor of Victoria.

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