LANSING, MI – Michigan’s improving economy and the state’s solid fiscal planning have prompted Moody’s Investors Service today to upgrade the state’s credit rating for all general obligation bonds to Aa1 from Aa2. The new rating carries with it a “stable” outlook.
The move is an affirmation that the state is headed in the right direction, and will save taxpayers money by lowering borrowing costs in the future.
“This is outstanding news for the state of Michigan and our taxpayers and residents,” said Gov. Rick Snyder. “We have worked relentlessly since taking office in 2011 to get our fiscal house in order, put in place a simple, fair and efficient tax system, reduce the state’s long-term liabilities, and grow the state’s economy and quality of life for all. This reaffirms that work and why it’s so important to continue moving forward on this path.”
In its announcement, which formally rated $990 million in Michigan State Building Authority (SBA) Bonds, Moody’s noted that the upgrade “reflects improvement in the state’s financial position, particularly growth in the state’s rainy day fund, bolstered by a strong tax revenue trend; a robust growth rate in the economy that has featured an improvement in the auto sector; and moderate debt and pension burdens.”
The upgrade announcement also noted Moody’s expectation that “the state will continue to oversee local government distress with manageable direct state financial exposure.”
“This upgrade shows that Wall Street recognizes the important steps we have taken to improve the state’s financial position in recent years,” said State Treasurer Nick Khouri. “It also shows renewed confidence that we will continue to be good stewards of the people’s money and make prudent financial decisions in the months and years ahead. Today’s upgrade will mean lower borrowing costs in the future.”
According to Moody’s, “Michigan’s economy continues to improve and its auto sector has stabilized. The state has been adding to its rainy day fund, and liquidity and fund balance are once again healthy…” The report adds that Michigan’s “current credit profile is significantly stronger than it was five years ago, and we expect the state to remain stable going forward.”
“For the first time in a decade, Michigan’s personal income growth is outpacing the nation’s and our unemployment rate has come down dramatically with the best private sector job growth in the Midwest,” said State Budget Director John Roberts. “These key economic factors demonstrate a positive trajectory for the state, one that we expect to show continual improvement going forward.”
Earlier this week, Standard & Poor’s Ratings Services revised Michigan’s outlook to “positive” while affirming the State’s AA- rating.
A large portion of the planned SBA issue is a refunding, with anticipated present value savings of $62 million which translates into savings of $17 million annually. The SBA transaction is expected to price on July 30, 2015.
The State Building Authority provides financing for state projects, primarily at universities and community colleges, and plays a key role in the state’s overall capital financing.