City bond rating gets upgrade from S&P

Nathaniel Herz

Anchorage has received a rating upgrade from Standard and Poor's, raising the city's bond rating to the top level of AAA, Mayor Dan Sullivan announced Tuesday.

The upgrade could save the city nearly $1 million in interest payments on $43 million in school bonds it's scheduled to sell Wednesday, according to Chief Fiscal Officer Lucinda Mahoney -- though depending on market conditions, the savings could end up being less, she said.

The other agency hired to rate the bonds, Fitch, kept the city's rating at AA+, or one notch below the top score.

Standard and Poor's raised its rating based on the city setting aside higher reserves, which jumped from $48 million at the end of 2011 to $75 million at the end of 2012. That was about 18 percent of Anchorage's total spending, according to the agency's report.

The report also said that the city's strong economic position -- which supports the tax base needed to pay back the bonds -- played a role in the upgrade.

"This is the economic center of the state," Jen Hansen, the report's main analyst, said in an interview. "The assessed valuation never fell, even during the recession. Municipal unemployment is low. There's a lot of things that point to a very strong, diverse economy here."

Fitch's primary analyst could not be immediately be reached for comment, but Mahoney said that that agency told the city that it wanted to see even higher reserves before raising its rating.

The Fitch report also mentions the pressure on the city from rising labor costs, and notes the recent efforts by the Sullivan administration to limit them by putting in place a controversial new labor law.

"The outcome of these challenges remains very uncertain, suggesting labor cost pressures will remain significant...over the next few years," the report says.

Sullivan announced the Standard and Poor's upgrade at a news conference at City Hall, flanked by large posters trumpeting the city's new AAA rating in bright red lettering.

"It's a result of an awful lot of hard work by the executive team, the directors, and all the employees of the municipality," he said.

Officials said the AAA rating was the highest ever for the city.

Reporter Tegan Hanlon contributed. Reach Nathaniel Herz at or 257-4311.