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Fairmont witnesses ratings dip

July 23, 2013
Meg Alexander - Staff Writer , Fairmont Sentinel

FAIRMONT - Fairmont is 600-some miles away from Detroit, but in the future, municipalities across the United States could be feeling the impact of the Motor City's recent filing for bankruptcy.

On Monday, Fairmont City Council approved the sale of $1.7 million in improvement bonds to Robert W. Baird & Co., which offered the lowest interest rate of 2.96 percent. It was a competitive bid, better than the city might have hoped for given current events.

Fear that Detroit's woes signal more financial problems for cities across the country could make investors skittish in the future about municipal bonds, which were considered a relatively risk-free investment for years.

"Detroit didn't do us any good. ... Philadelphia didn't do us any good," said Bill Fahey, vice president of Northland Securities' public finance department.

"It will have an impact," he said, whether Detroit's bankruptcy is approved or not.

"If Detroit is permitted to file bankruptcy, it will be bad. If it's denied, it will not be good. There's no cure, no matter which way you look at it," he said.

The negative news didn't end there, though.

Fahey informed the council that Fairmont's credit rating has dropped from Aa2 to Aa3.

Northland Securities is researching a systematic downgrade in Moody's credit ratings that has taken place in the past 10 months.

"I and the city staff are deeply disappointed with the rating results," Fahey wrote in a memo to the City Council. "The city looks better today than a year ago. However, I am convinced that someone within Moody's determined some credit ratings were too high due to the implementation of the 'Global Rating System.' The Global Rating System was supposed to make any rating mean the same, whether for city or private business or a non-profit."

Fortunately, the bid from Robert W. Baird was good, Fahey said, and the city's credit downgrade effectively made no difference.

"You're still in the AA category," he said. "... And there's still a mass of buyers of municipal bonds."

 
 

 

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