Grace Kirchner, Leader Correspondent
A missed bond payment by the city of Clintonville has resulted in the city’s bond rating falling from A-plus to A, officials said.
Although such downgrades can require cities to pay higher interest rates when borrowing money, City Administrator Chuck Kell said he did not think the change would harm the city much, if at all. Any rate increase probably would be no more than one-tenth of a percentage point, he said.
The downgrade was announced by ratings agency Standard & Poor’s, as the city prepared to issue $2.75 million in general obligation promissory notes approved by the Clintonville City Council.
Kell said he has taken steps to ensure that the problem does not happen again.
The city missed a bond payment because Depository Trust Company is supposed to notify the city when bond payments are due, but did not do so, he said.
“What we did receive was a notice six days later that the payment was late,” he said.
The payment was made the next day.
Officials at Florida-based Depository Trust Company could not be reached for comment.
Alderman Chuck Manske expressed concerns about both the missed payment and how officials at Standard & Poor’s responded.
“They thought that though steps have been put in place so it never happens again, there should have been steps in place to remind ourselves and to safeguard missing a payment,” Manske said.
Kell said notices for bond payments previously were sent to city Clerk-Treasurer Peggy Johnson, but that sometime in 2014 those notices started going instead to the city’s utility accountant. The city administrator said he now has arranged for more than one person at the city to be aware of bond payments.
Kell discussed the situation with the city’s financial consultants, Ehlers and Associates, and recommended that the city contract with Bond Trust Services, a subsidiary of Ehlers, for the next three to five years to improve its bond rating.
The council voted to contract with Bond Trust Services to monitor the city’s debt and watch for payment dates. The yearly cost of the new service is $350 per bond issue. With five outstanding outstanding bond issues, the city’s cost will total $2,100 a year.
With the ratings downgrade, Kell said, it might take until 2018 to get the A-plus rating restored. The city has to prove that it now has better management of its payments.