By Mark Wineka
mwineka@salisburypost.com
A Salisbury delegation will travel to New York this week looking to improve the city’s general obligation bond rating in anticipation of financing a $30 million-plus fiber-optic cable utility.
The city had pursued direct bank placement financing for the “Fiber to the Home” project, but with credit markets as they are these days, “no one bank was excited about taking the financing on by themselves,” Management Services Director John Sofley said Friday.
He said that’s why the city will now pursue a public sale of bonds.
The exact amount of debt the city will look to issue has yet to be determined, but Sofley estimated the amount would be about $33 million when the cable utility and some $2 million in general fund projects are factored in.
Salisbury will be looking to get a new rating from Moody’s Investor Service and Standard & Poor’s for its general obligation debt and a specific rating for the Fiber to the Home project.
When there is a public offering, the debt is rated as to its credit worthiness ó how the market perceives that debt and the ability of the city to meet its obligations.
The higher or better the rating, the lower the interest rate the city could expect to pay on its bonds.
Moody’s currently has the city’s bond rating at A-1, and Standard & Poor’s puts the city’s debt rate at A-plus. The ratings are equivalent, Sofley said.
One of the main goals of the city delegation’s visit to New York will be to receive the highest possible rating on its debt. A-1 and A-plus ratings are considered “investment grade,” Sofley said.
The highest rating the city could receive is “AAA.”
The city delegation will include Sofley, Mayor Susan Kluttz, City Councilmen William “Pete” Kennedy and Mark Lewis, City Manager David Treme, Technology Services Director Mike Crowell, Budget and Performance Manager Teresa Harris, Assistant to the City Manager Doug Paris and Ted Cole of Davenport & Co., the city’s financial advisor.
They will have three meetings and presentations Tuesday in New York.
At 9 a.m., the group will meet with representatives of Assured Guaranty Corp. to discuss insurance on the proposed bonds. Assured Guaranty Corp. is a AAA-rated firm, and if it were willing to insure the city, it would allow Salisbury to sell the bonds as AAA-rated issues.
At 11:30 a.m., the delegation will meet with Moody’s to discuss a bond rating on the proposed bonds.
At 2 p.m., the Salisbury group will meet about a bond rating with Standard & Poor’s.
Salisbury will introduce the Fiber to the Home project and demonstrate its predicted ability to pay the debt it would incur.
Sofley said the city probably won’t know until later on in October what the exact financing package will be with the assigned credit rating.
The new utility, with an estimated start-up cost of at least $30 million, would offer customers telephone, television and Internet services.
Smaller cities such as Salisbury are looking to build state-of-the-art fiber networks in which the bandwidth is capable of speeds and capacity many times greater than the cable that runs now to most businesses and homes.
They are afraid of being left behind as cable and telecom companies focus their efforts first on upgrading service in the country’s larger cities.
The city of Wilson, after which Salisbury has patterned much of its cable initiative, rolled out its Greenlight cable system this year. Salisbury is more than a year behind Wilson in its project, but it already has negotiated a pole attachment agreement with Duke Energy.