Taylor, Yundt: Anchorage bond rating was downgraded in November, but more bonds are on the ballot

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By JODI TAYLOR AND ROB YUNDT

Recently, regional banks in the United States and one major international bank have either collapsed or, in crisis, been rescued by larger banks, due to liquidity issues. 

Given these financial headwinds, it is a great time to assess the financial viability of the Municipality of Anchorage as voters decide how to vote on the many bonding propositions on the ballot.

In November 2022, Anchorage had its bond rating (credit score) downgraded by Fitch, citing the Municipality’s depleted cash reserve levels, which were not adequate to cover 10% of the Muni’s current year expenditures in its general fund.

That means the Muni was required to have about one month’s annual expenses in cash in order to maintain its rating. It did not.

Later, Fitch updated its rating notes after finding the Muni could borrow up to $640 million in cash. Basically it found that the Muni’s liquidity issues were solved because the Muni had a “credit card” with a $640 million limit. 

This is not the place of financial strength one would hope for and not how we the voters run our personal finances.  Financial advisors suggest families have three to six months of cash on hand, yet the Municipality of Anchorage has less than a month.  

Contrast that with the MatSu Borough. In 2022, Fitch maintained the Borough’s bond rating, although the Borough was not seeking to borrow any money, and cited the strong cash reserve position for the rating. The MatSu Borough has roughly two month’s annual operating expenses and one year of its annual debt service on hand.  

The Muni and the MatSu Borough also differ what type of capital projects they take on and how they pay for them. For example, the Muni is seeking in this current election cycle to bond to repair roofs, replace worn out equipment, or rehabilitate a trail, essentially bonding for maintenance, a dubious financial position to be in. 

Contrast this with MatSu Borough paying $25 million for a new school this year — with cash. Two years ago, MatSu voters approved a roads package — adding roads, not repairing them — again the Borough paid cash. MatSu has increased its school enrollment by 64% in the last 10 years, yet is paying for schools with cash, rather than borrowing. 

In addition, the cost of borrowing has increased.  The average loan in 2020 was 3.7%, versus the current 7%. The Fed just bumped rates a quarter point this week. Any new bonds (debt) added to the Muni would cost about 1.5 times what that same liability would have cost per month in 2020. Similarly, short-term lending to cover monthly expenses, or the $640 million in borrowable cash, also will increase the Muni’s monthly expenses.

Given the problem the Muni has with low cash reserves and the substantially increased costs of bonding, it’s not the time to add more debt.  Let’s learn lessons from the bank failures and the MatSu’s example of being financially prudent in regards to taking on additional debt.  It’s not the right time to add more debt to the Muni monthly expenses, rather, we should wait until the Muni replenishes its cash reserves before taking on any more debt in the short term.  

Rob Yundt, MatSu Borough Assemblyman, and Jodi Taylor, Anchorage resident, are each life-long Alaskans, business owners, and (by happy coincidence) they both have six kids.

21 COMMENTS

    • As a longtime resident of the Municipality of Anchorage who plans to continue to live here and firmly believes and will invest in a government of the people, for the people, and by the people: We are not and will not become Detroit. Written responses can sometimes be difficult or confusing for some people some of the time to determine the tone. So let me clarify for the record…the tone of this posting is matter of fact and determined. : )

      • You already are Detroit. It just hasn’t fully hit you yet.

        -The Politburo picks winners and losers in business.
        -You have a rampant and growing homeless population.
        -More people are sponging off taxpayers than pay into it.
        -rampant, uncontrolled spending with no way to pay for it
        -crumbling infrastructure.
        -steady stream of businesses and taxpayers leaving.
        -failed school system.

        It goes on and on.

        Best part is, you DO have a government, of/for/by the people. This is what the people who bother to vote want.

        Failure to acknowledge reality will not change it. We are a blue state and Anchorage is so blue it’s damn near purple.

  1. The decision of how to vote on these bond issues is easy for our family….just say NO and move on. unless and until they get back under the tax cap and someone learns what fiscal responsibility means!!!

  2. Vote no on bonds. I keep forwarding these articles to our adult children who currently live in Anchorage. ?

  3. Yea ….bonding for maintenance, I worked at MOA maintenance. That place SHOULD be audited; theft, waste & laziness was a big problem when I was there.

  4. The Bronson Administration has been adept at screwing everything up just about everything managing Anchorage government. I believe we had a very good bond rating with the Berkowitz Administartion

    • Burkowitz was clearly not effective. The same problems are still around!! He left a huge mess that the Assembly spreads around with their stompy foot act

    • Incredible that you could be so obtuse as to completely ignore the unbelievable amount of cash that the ASSEMBLY has blown through in the last 4 years and attempt to lay the blame at the feet of the people trying to run the city.

    • Doesn’t pass the sniff test dude. Bond ratings are failing due to what Berky and Quinn Davidsons mutual mayoral terms. This is the mess left for Bronsons administration.

    • The bond rating, much like a person’s credit rating, does not shift immediately. It takes time to ruin something like a City’s bond rating. The events that led to this downgrade likely started under Berkowitz.

  5. In the past, I have voted NO! On most bonds, especially on the school bonds!!! I have worked indirectly for ASD for 23 years and have recently retired due to the moral breakdown of our school district. If I still had school aged children at home, they would never set foot in a public school! The public has been taken to the cleaners, constantly bailing out the the district, financially! I will never vote yes on any school bonds ever!!!

  6. Hey! I know what will help.
    .
    Refuse to pay valid invoices from contractors.
    .
    Nothing says “We have good credit” more than stiffing a contractor.

  7. Thank you for your professional and responsible assessment.
    A good example is the current misguided Prop6, which is all about setting up State owned park land and roads for bonds.
    This is precisely what the Infrastructure monies, which our Congressional Delegation worked so hard to secure.
    BTW- Kincaid Park, owned by the municipality, improvements were paid for by federal dollars.

  8. If the Municipality’s depleted cash reserve levels, which were inadequate to cover 10% of the Muni’s current year expenditures in its general fund are an issue now,
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    … what’s likely to happen to the Municipality’s bond rating if Eaglexit is allowed to succeed and those taxpayers were no longer forced to pour money into the Municipality’s cash reserve?
    .
    Could this be a blessing in disguise if cash reserves got really depleted because Eaglexit succeeded, Muni bonds got downgraded to “junk” status, and the city went broke because there weren’t enough taxpayers left to support it, and no one except China would buy the city’s junk bonds?

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