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Moody’s Amends Dayton Bond Rating Under Global Scale System
The City of Dayton has learned that Moody’s Investment Services has modified the City’s bond rating from A1 to the stronger rating of Aa2 (double A 2) as part of its global recalibration process. The Aa2 rating is two steps above Dayton’s previous rating for General Obligation (GO) debt.
In recent years, Moody’s had been requested by public agencies and congressional leaders to move from its U.S. municipal scale to one more uniformly accepted around the world. In an effort to provide greater transparency about the meaning of its ratings, Moody’s agreed to undertake this “global scale recalibration.” In doing so, the ratings firm analyzed its various agency rankings and adjusted them to fit more comparably in the global rating system. Moody’s has stated that the move to a global scale does not necessarily reflect an improvement in credit quality, but reflects a more comparable level of credit risk between public and private agencies.
“Moody’s decision to lift our ratings two notches from A1 to the high grade category of Aa2 in the global scale shows their confidence in Dayton’s fiscal stability when compared to other public and private agencies,” Deputy City Manager Stanley Earley said. “They realize that we have smaller amounts of money at our disposal, but they understand and value the way we successfully manage the dollars we do have.”
Bond rating agencies like Moody’s and Standard and Poor's regularly evaluate and assign credit ratings to public entities and private companies. Last summer, Standard & Poor’s upgraded Dayton’s rating from A+ to AA-. Dayton’s ratings are based on the local economy, demographics, management and finances. The assigned ratings ultimately affect Dayton’s ability to issue bonds and the interest rate the City must pay on those bonds. The higher the rating, the lower the cost of borrowing, which saves taxpayer dollars.
Dayton’s general obligation debt is used for community development purposes such as purchasing equipment, funding infrastructure, community and airport improvements, and, when interest rates are attractive, refinancing earlier bond issues. The funds cannot be used for General Fund purposes like paying salaries or day-to-day operational costs.
Moody’s summarizes its long term debt ratings as follows:
Investment Grade
Aaa – “gilt edged”
Aa1, Aa2, Aa3 – high-grade
A1, A2, A3 – upper-medium grade
Baa1, Baa2, Baa3 – medium grade
Speculative Grade
Ba1, Ba2, Ba3 – speculative elements
B1, B2, B3 – lack characteristics of a desirable investment
Caa1, Caa2, Caa3 – bonds of poor standing
Ca – highly speculative
C – lowest rating, extremely poor prospects of attaining any real investment standing
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