AVALANCHE-JOURNAL

LP&L Ratings Earn Upgrade
 

THREE MAJOR rating agencies look at all aspects of cities across the United States.

All three agencies - Standard and Poor's, Moody's Investor's Service and Fitch Ratings - not long ago were forced to downgrade our ratings due to LP&L's past financial situation as well as how it could affect the general fund balance of Lubbock.

Thanks to the vision of our City Council, we are now on the right path. The LP&L incident gave each Lubbock citizen tangible evidence that our City Council members truly want the best for Lubbock - and that they know how to get us there.

Just last week, for example, Lubbock's improving fiscal health triggered another key move in bond ratings circles.

Citing the health and stability of the local economy and Lubbock Power & Light's improving financial condition, Fitch Ratings joined two other credit rating agencies by removing the city of Lubbock from its "watch list," reported The A-J's Jason Womack. Fitch gave Lubbock a negative outlook after a significant amount of funds was transferred to LP&L in fiscal year 2003, depleting the city's general fund and cash reserves.

Fitch's latest decision to move the city from a rating of AA- with a negative outlook to AA- with a stable outlook means that Lubbock's bond rating is less likely to be downgraded in the future, according to Lubbock Chief Financial Officer Lee Ann Dumbauld.

According to a statement released by LP&L, investors will be more interested in purchasing general obligation bonds offered by the city and LP&L to fund capital expenditures and general improvements. "It makes the cost of borrowing cheaper," Ms. Dumbauld explained.

An earlier Moody's Investor's Report said Lubbock's general fund took a significant hit from the LP&L fund transfer, dropping from $18.6 million in fiscal year 2002 to $9.4 million, or approximately 11.6 percent of general funds revenue, in 2003. The general funds now have been restored and fiscal recovery has occurred faster than expected, a Feb. 22 Fitch report noted.

"We've worked really hard for this," Carroll McDonald, LP&L director of electric utilities, said in the statement. "The belt-tightening measures we've taken over the past two years have helped us put LP&L back in the black."

With continued good results during fiscal year 2005, there is a good chance the ratings will continue to improve, particularly now that LP&L has posted sufficient reserve levels to weather any revenue shortfalls or unexpected expenses.

Fund balances are not something to impact negatively, and Lubbock can settle for nothing short of securing and maintaining exemplary city bond ratings.