Newspaper article St Louis Post-Dispatch (MO)

St. Louis Hopes to Move Up Upgrade in Bond Rating Looks Likely, Firm Says

Newspaper article St Louis Post-Dispatch (MO)

St. Louis Hopes to Move Up Upgrade in Bond Rating Looks Likely, Firm Says

Article excerpt

With millions of dollars in interest costs potentially at stake, St. Louis city officials hope that Wall Street investment analysts will begin reversing the 20-year slide in the city's bond rating.

Comptroller Virvus Jones says an improved city financial situation in recent years gives the city a shot at getting better marks this year from the three major rating firms.

Moreover, he said that the Nov. 8 election defeat of the Hancock II amendment and the approval of slot machines for riverboat casinos have removed two of the firms' worries about the city's revenue capacity.

The city of St. Louis now has a BAA rating from Moody's Investors Service, Inc. - seventh from the top on that company's 13-point scale of ratings - and somewhat lower BBB ratings from Standard & Poor's Corp. and Fitch Investors Service, Inc.

Those are among the poorest marks for uninsured general obligation bonds that can be sold to raise money by local and state governments in Missouri and Illinois. In the metropolitan area, only Berkeley got a rating as low as St. Louis'.

Because general obligation bonds are secured by the full faith and credit of the government, ratings on such issues are considered an indicator of financial health.

At the high end is the state of Missouri - one of only five state governments to get the top AAA rating from all three companies. St. Louis County is just a notch below.

Illinois state government has experienced rating reductions in the 1990s, although not to nearly as low a spot as St. Louis.

Sharon Gigante, a Standard & Poor's official, said Friday that "the likelihood is good" for an upgrade for St. Louis this year but that a decision had yet to be made. Spokesmen for the other firms declined to speculate.

Meanwhile, officials of the three companies said they have heard of no problems here similar to that faced by Orange County, Calif., which declared bankruptcy after experiencing a $2 billion loss from derivative investments.

"The Midwest in general is very conservative" regarding investment of public money, said Steve Murphy, another Standard & Poor's official.

St. Louis began its rating decline in 1975, when population and job losses and budget problems prompted both Moody's and Standard & Poor's to drop the city's AA rating to A. The two firms imposed further reductions in later years. Fitch didn't begin rating St. Louis until 1991.

In December 1993, Standard & Poor's indicated that a rating turnaround might be on the way when it revised its outlook for the city to "positive" from "stable."

In that report, the company cited substantial downtown development, sales tax increases approved by voters and expected revenue from riverboat gambling. But the report also said that the city still had below-average "wealth and income indicators," was working out of a recession and had "stable though tight" financial operations. …

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