Carrying out the policies of City Council, employees in the Budget and Finance Division actively work behind the scenes to manage the City's debt and find opportunities to decrease interest costs paid by taxpayers. Thanks to refinancing and prepayments of Utility Fund bond obligations, the City's cost reduction efforts have saved residents $11.5 million dollars. These actions continue the City's long-standing practice to prepay and refinance debt when market conditions are favorable.
The savings come from the City refinancing a 2009 obligation to the Utility Fund, and early payoff of a $4.8 million Utility Fund loan from the Oregon Economic and Community Development Department. The money saved will be put toward maintaining the systems necessary to deliver clean water, and treat sewage and storm water. It also relieves the commitment of other revenue sources that support services outside of the utility.
"It is because of our credit rating that we are able to get such good interest rates and savings," says City Manager Steve Powers. "The fact that Salem can offer the level of service it does, with per capita property tax revenues equal to cities much smaller than us, is a testament to our sound management practices."
The City had its AA credit rating from Standard & Poor's Global Rating for its general obligation bonds affirmed in 2016. In June 2017, Moody's, another ratings agency, upgraded the credit rating of the City's Utility Fund to Aa2. Both of these ratings show that Salem is a quality, low credit risk borrower, and that the City has a very strong ability to meet its financial commitments. These very strong scores come after a comprehensive evaluation by the ratings agencies of the City's management practices, past financial performance, and overall economic health of the community. Like credit ratings for individuals, the better the rating, the easier it is to get a loan and the lower the interest costs.
The City is in the process of another rate review that should produce favorable results for issuing bonds that will pay for the construction of the new police facility Salem voters approved in May 2017. With a favorable credit rating and interest rates, the City is looking at prepayment and refinancing options on voter-approved debt for the Streets and Bridges, and Fire Bonds.