After years of belt-tightening and squirreling away cash in reserves, New Orleans’ credit just got better.
The Standard & Poor’s credit rating agency has again upgraded its long-term and underlying rating on the city’s general-obligation debt, moving it up two grades from A- to A+, Mayor Mitch Landrieu said Wednesday.
A+ is the agency’s fifth-highest score.
The agency also issued a positive outlook for all of the city’s bond ratings, based on recent and projected improvements in the city’s budgetary performance and fund balance.
It’s the city’s third Standard & Poor’s rating upgrade since Landrieu took office in 2010 and the second one this year. The first 2015 upgrade was from BBB+ to A-.
It’s a major improvement from the city’s below-investment-grade rating shortly after Hurricane Katrina and an improvement from what it had prior to the storm, city officials said.
Standard & Poor’s is one of three major rating agencies that advise bond buyers on how risky it is to lend New Orleans money.
The higher the rating, the less interest the city typically has to pay when it sells bonds.
“This is a major milestone for the city and continued validation of the progress we have made in reviving the city’s finances,” Landrieu said. “When we took office nearly six years ago, our administration faced a huge $97 million budget hole, but we pulled the city back from a fiscal cliff by shrinking government and delivering better services.”
The Board of Liquidation, City Debt, which manages New Orleans’ general-obligation debt, requested the rating review from S&P as part of a refinancing of $71 million in existing debt. Coupled with the higher rating, a refinancing will lead to lower overall interest rates and save the city money in terms of lower debt service costs in future years, officials said.
The city projected it would have a $63.3 million fund balance in 2016, but about $10 million of that will go toward an upfront payment to the city’s firefighters, who reached a settlement with Landrieu earlier this month after a bitter fight over back pay and pension payments.
Even with that, reserves are at a five-year peak, up from less than $3 million in 2010.
Landrieu said the firefighters pension deal will save taxpayers money in the long run.
Follow Jessica Williams on Twitter, @jwilliamsNOLA.