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Despite uncertain state economy, S&P upgrades Anchorage bond rating outlook to 'stable'

  • Author: Devin Kelly
  • Updated: December 2, 2017
  • Published November 22, 2016

The credit rating agency Standard & Poor's has revised the outlook on Anchorage's top AAA bond rating from "negative" to "stable," with analysts describing the city as insulated from the state's economic woes.

Ratings matter because they affect the interest Anchorage and its taxpayers pay on bonds sold by the city for a range of improvements. In a statement, city spokesman Myer Hutchinson said a rating downgrade would cost the city more than a half-million dollars over 20 years, based on current bond rates.

An increase in the city's budget reserves contributed to the more positive outlook, as well as strong financial policies and a local economy drawn almost entirely from local revenue sources, S&P analysts wrote in a report issued earlier in November.

The revised outlook means there's at least a one-third chance the city's AAA bond rating will not change in the next two years.

That's a reversal from October 2015, when S&P downgraded the city's outlook to "negative" amid uncertainty in the state's oil-based economy and signs of weakness in city reserves. S&P downgraded the state's credit rating from AAA to AA+ in January

In an interview Tuesday, analysts said the rating agency hadn't seen expected deteriorations play out.

"Anchorage … was showing some increased distance between its financial status" and the state of Alaska's, said Cody Nelson, the primary credit analyst on the S&P report.

The city's commitment to put the equivalent of 10 percent of the annual budget into savings increased the expectation of stability, Nelson said.

Anchorage's savings account reserves totaled $81 million in recently released audited financials, or 20 percent of the city's operating budget. That compares to $65.7 million in 2014, about 14 percent of the city budget, when Dan Sullivan was mayor.

While Mayor Ethan Berkowitz and his deputies painted a bleak budget picture this year and blamed the state for shifting costs, the city's Chief Fiscal Officer Robert Harris said that's what drove discussions about making cuts.

He said he expected the city to keep its AAA bond rating in the near term. S&P first gave the city the rating in 2013.