San Antonio (enviable AAA General Obligation Debt Bond Rating ) - Case Study Example

San Antonio (enviable AAA General Obligation Debt Bond Rating) A. What do the statistics tell us? The statistics reveal that San Antonio has exhibited robust growth in their municipality as evidenced from the positive outlook generated by the relevant factors, such as the property values, the employment base, the low cost of living, surplus operations and level of reserves. The highlights of the statistical information are noted below:Factors Contributory to AAA RatingPatterns ExhibitedTime FramesProperty Values and Taxable Assessed ValuesSteady increase from 2008 to 2010 with slight decline in 20112008 to 2011Unemployment RatesBelow level at 7.

4% compared to Texas’ (8.1%) and Nation’s (8.8%) rateMarch 2011Per Capita IncomeLow at $ 17,487 but the low cost of living along with stable employment helps offset thisMarch 2011 Surplus Operations and ReservesReserves at 9%; equal $85.3 million.Fiscal Year 2012 From Moody’s official website, the strengths of San Antonio’s condition were aptly summed as: “sizeable regional economy that remained relatively stable through the economic downturn; (and) strong financial management practices demonstrated by a history of surplus operations and adequate reserves” (par. 6). These were validated by the statistics and patterns highlighted above.a. How do San Antonio’s variables measure up to common variables?

When compared to other common variables, as noted, San Antonio’s unemployment rate which was 7.4% was comparatively low in contrast to the unemployment rate exhibited by the whole of Texas (8.1%) and of the country, in general (8.8%). This is significant considering that, as reported, San Antonio is the only U.S. City with a population over one million to be given a ‘AAA’ bond rating by all three rating agencies. Further, their rating was likewise compared to the ratings generated by other municipalities, such as Columbus, Ohio and Kirkland, Washington; and the following highlights are noted:COMPARATIVE VARIABLESMUNICIPALITIESPATTERNS/COMMENTSUnemployment Rates Columbus, Ohio7.

3% as of April 2011ReservesColumbus, Ohio$33 millionStrong Reserves and Strong Financial PoliciesKirkland, WashingtonCommon Factors with San AntonioOngoing growth in local economy and strong management practicesEdina, MinnesotaCommon Factors with San AntonioStrong economic condition, very low unemployment rate & large wealth levelsArlington, VirginiaCommon Factors with San Antonio It is eminent therefore that rating agencies evaluate the credit ratings of municipalities based on the factors that were revealed.

As disclosed by Moody’s, San Antonio’s rating could be changed to lower ratings when the following scenarios occur: “(1) failure to maintain balanced operations; (2) trend of declining reserves; (3) trend of significant taxable value loss indicating a weakening of economic position; and (4) change in the US rating that results in pressure on local government Aaa ratings” (Moodys Investors Services, Inc. par. 8).Works CitedMoodys Investors Services, Inc. "MOODYS ASSIGNS Aaa RATING TO CITY OF SAN ANTONIOS GENERAL IMPROVEMENT REFUNDING BONDS, SERIES 2012;.

" 26 March 2012. moodys.com. 27 April 2012 .