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EAST LANSING, Mich. — S&P Global Ratings has assigned its ‘AA+’ long-term rating to the City of East Lansing’s series 2021 limited-tax general obligation refunding bonds and has affirmed its ‘AA+’ long-term rating on the City’s previously issued debt, with a rating outlook that is stable.
Bond ratings are a way to measure the creditworthiness of a bond, which corresponds to the cost of borrowing for an issuer. A thorough financial analysis of an entity is completed by the rating agency before issuing a score. The ‘AA+’ rating is the second highest rating that a government can receive from S&P Global Ratings.
“This recent rating from S&P Global Ratings is great news for the City of East Lansing,” said East Lansing City Manager George Lahanas. “It is an indicator of our ongoing, strong financial management practices under the leadership of the East Lansing City Council and our continued financial stability despite the many detrimental impacts of the COVID-19 pandemic.”
In its rationale for the City of East Lansing’s current rating, S&P Global Ratings cites the adequate local economy, with access to a broad and diverse metropolitan statistical area; the long-term stabilizing influence of Michigan State University on the tax base and economy; the City’s very strong financial management policies and practices; and a low direct debt burden. The rating agency also points to the City’s long history of maintaining structurally balanced operations through various economic cycles and the City’s ability to maintain reserve funds at close to 15 percent of expenditures.
While East Lansing’s large pension and OPEB (Other Post-Employment Benefits) obligations remain a credit weakness for the City, the rating agency does note that the City’s voter-approved income tax should help improve the funded ratio over the long term. Additionally, while S&P Global Ratings does see some risk that the COVID-19 pandemic may have a lagging negative effect on property values, particularly in the commercial sector, the City's housing market has been performing well, which may offset declines in the commercial sector.
The City will use series 2021 bond proceeds to refund portions of the City’s series 2011A and 2012 general obligation bonds for interest cost savings. The previous bonds are related to parking facility improvements, utility improvements and construction of the East Lansing Department of Public Works building.
Community members can view S&P Global Ratings’ full report here: https://www.cityofeastlansing.com/DocumentCenter/View/10602/S--P-Rating-Report-950540-PDF.