The City of Malibu has earned an AA+ bond rating, the highest rating possible for a municipality according to the bond rating firm Standard & Poor’s (S&P), who announced the new rating while City staff were going through the process of refinancing bonds for Legacy Park and City Hall improvements.
The bond refinancing is set to save the City $3.3 million over a period of 25 years, according to Assistant City Manager Reva Feldman.
“Overall, we’re looking at an interest rate we have been paying of about five percent,” said Feldman at the Monday, April 13, City Council meeting. The new interest rate will be about 3.75 percent.
Sarah Brown, the Managing Director of Stifel, Nicolaus & Company, Inc. the underwriter of the City’s bonds, announced that the bond sale will occur this week, on April 22, when those who hold older bonds will be cashed out, with the opportunity of purchasing bonds under the new 3.75 percent financing.
“Many residents own bonds that are being refinanced,” Brown said, adding that those interested in the new bonds may have a tough time getting their hands on some.
“Everybody wants to own a piece of Malibu,” Brown said. “We tend to not have a lot left at the end of our ordering period.”
The refinancing came after a request by City Councilmember Joan House, who asked staff to look into whether interest rates had dropped.
Whether or not this is the prime moment to refinance is hard to know for sure, according to Brown.
“I wish I had a crystal ball to tell you it’d be better six months from now or six years from now,” Brown said.
“If there are alternatives … in the future, if it does make sense for us to pay down the debt on some of these things, maybe we should consider that,” Councilmember Peak said.
The new bond rating is a point of pride for the City, bringing it alongside major metropolitan areas like New York and San Francisco, who also have recently been rated at AA+.
In September of 2014, nearby Los Angeles received a lower AA- bond rating.
Feldman said there’s an advantage for cities who have a better bond rating.
“When we go to borrow money on the open market, it provides us with a better interest rate,” Feldman told The Malibu Times.