EAST LANSING, Mich. — Fitch Ratings has affirmed the City of East Lansing’s AAA bond rating, with a rating outlook that is stable.
The rating reflects the City’s solid financial position, prudent financial management and stable local economy, anchored by the state capital and Michigan State University.
“This is very good news for the City of East Lansing,” said East Lansing City Manager George Lahanas. “We have been able to maintain our AAA rating through extremely difficult financial times due to careful stewardship of City resources under the leadership of the East Lansing City Council. The hard work of City staff and the support of our residents have also contributed significantly to the City’s financial stability.”
In its report, Fitch Ratings notes that the City’s general fund operations are balanced and that reserve levels are solid (above the City’s 15% policy) and also notes that the City’s Other Post-Employment Benefits (OPEB) liability has been prudently managed in recent years, including frequent prefunding. The report also recognizes that the City’s tax base resumed growth in Fiscal Year 2015, following multiple years of modest decline.
While the AAA bond rating demonstrates that the City has been able to navigate through tough financial times, significant budget challenges still remain, primarily due to legacy costs and infrastructure needs. The City’s pension plan funding ratio continues to decline despite the City making its Actuarially Required Contribution (ARC) each year – a large contributing factor of this ongoing, significant challenge was the 2008 market crash. Infrastructure needs include, but are not limited to: a multi-million dollar project at the Waste Water Treatment Plant and a road/sidewalk/utility reconstruction project planned for the Chesterfield Hills neighborhood.
“We have had to make some tough choices over the past couple years and are continuing to work through the financial challenges we face,” said Lahanas. “Many steps have been taken and will need to continue to be taken in order for the City to remain fiscally sound.”
In addition to the AAA bond rating from Fitch Ratings, Standard & Poor’s recently affirmed the City of East Lansing’s AA+ bond rating.