By Mark Wineka
mwineka@salisburypost.com
Despite the staggering U.S. financial news of recent weeks, Salisbury officials returned home encouraged by the reception they received last week when they traveled to New York in hopes of improving the city’s credit rating.
City Manager David Treme said Tuesday the city should receive its new credit rating from Moody’s and Standard & Poor’s in about a week.
The city’s current ratings are A-1 from Moody’s and A-plus from Standard & Poor’s.
Both ratings are considered investment grade, but if the city could earn a higher rating, it could expect to pay a lower interest rate on the future public sale of bonds.
Salisbury City Council looks to finance the startup of a $30 million fiber-optic cable utility and several other capital projects with bonds.
The “Fiber to the Home” project is modeled after the cable utility recently started in Wilson. City projections say the utility, which would offer television, Internet and telephone services, could pay for itself with an interest rate on financing of 6 percent or less and at least a 28 percent penetration of the market.
Ninety-nine percent of the Fiber to the Home costs have been nailed down, and the city demonstrated that in New York, according to Treme.
Whether the fiber-optic project is held up or not by current market situations, Mayor Susan Kluttz said, it is something the city will keep pursuing. “We can’t stop our progress,” she said.
Kluttz said the city delegation, which included three council members, was energized by the reception it received in New York. Besides meeting with the credit rating agencies, the city delegation also met with representatives of Assured Guaranty Corp., an AAA-rated insurance firm.
If Assured Guaranty were willing to insure the city, it would allow Salisbury to sell bonds as AAA-rated issues. An AAA rating is the best.
The Salisbury delegation, which included Treme, several other staff members, the city’s financial adviser and the three council members, made three presentations and answered questions. Each session lasted about two hours.
“They really quizzed us,” Treme said, adding that the credit raters especially wanted to hear from the elected officials. They were pleased Salisbury had such a long-tenured council, he said.
Councilman William “Pete” Kennedy said the New York trip was a tremendous experience and education.
Councilman Mark Lewis called it a fascinating process.
A banker, Lewis said it felt as though the Salisbury delegation was making a pitch in front of a loan administrator. It could be an important trip, Lewis said, because any upgrade in the credit rating could save the city considerable money.
The bond raters were pleased to see Salisbury’s progress in things such as per-capita income and educational achievements, he said.
In the world economy, the United States is falling behind because most communities don’t have the cable bandwidth needed for increased capacity and speed, Lewis said.
Beyond typical cable services, the Fiber to the Home project, with its increased bandwidth, will open up economic opportunities for businesses to grow, Treme predicted.
“We’re large enough that we can do it, and we’re small enough that we can do it,” Kluttz said. “We’re just the right size.”
Wilson’s Greenlight cable startup has been up and running for only a few months and already has 10 percent penetration, Treme said.
With a volatile stock market, Treme said, investors may look toward municipal bonds as a place to put their money.
“I think we were received very favorably,” he added.
The city last had a new credit rating issued in 2003.
Other projects the city wants to finance with bonds include the reconstruction of tennis courts at City Park and upgrades of city-owned parking lots. The cable project would include a new customer service and technology services building.