Warren’s new bond rating good news in a sea of bad

Last fall, we offered the follow- ing observation about the city of Warren’s financial condition:

“[Warren] is in such dire straits fiscally that the administration of Mayor Michael O’Brien has secured the approval from the unions representing government employees to withhold the final pay of the year because there won’t be money to cover the checks. It means the city will have to come up with two pays at the start of the new year.”

This, after the administration slashed expenses all through 2009 by laying off 20 police officers, 15 firefighters (including four unfilled positions) and nine other workers. In addition, Mayor O’Brien, along with members of city council and the leaders of the employee unions, took a hard look at the cost of health-care coverage for city government workers. The $6 million price tag was projected to rise by $650,000 if nothing was done to control the costs.

In the midst of the worst national economic downturn since the Great Depression, Warren’s future looked bleak.

But O’Brien remained undaunted, saying the cost-cutting measures, along with some positive job-creation news would stabilize government.

The “rightsizing effort,” as it is being called, appears to have done just that. The recent announcement from Moody’s Investors Service that Warren’s bond rating is now pegged at A1, a rise from Baa, is an indication that the city’s economy is on the mend. The new rating not only reflects the steps taken by city government to control spending, but also comes on the heels of the recall of many of the 1,200 workers laid off from Warren steelmaker Severstal and the three shifts now working at General Motors Lordstown assembly plant to produce the highly touted and anticipated Chevrolet Cruze.

“Despite the challenges of one of the toughest economic times in a generation, we’ve still been able to manage our debt and adjust our expenses toward delivery of services,” O’Brien told The Vindicator.

Warren and Trumbull County have been battered by the economic storm that began sweeping the nation and the world in late 2008. Their high unemployment rates have placed them in an exclusive class nationally. The loss of 8.6 percent of the jobs in Trumbull County between December 2008 and December 2009 was highest among the 334 largest counties.

‘Low credit risk’

That’s why Warren’s A1 bond rating deserves to be acknowledged. It means that one of the world’s leading rating organizations has looked at what has taken place and city government’s future plans and has determined that a “low credit risk” designation for municipal bonds is justified. Should the city decide to generate revenue through the sale of bonds, it would attract a much larger pool of investors than if its bond rating was lower.

The rating also means that the interest rate the city would pay to borrow money will be lower than if its bond rating were in the “high risk” category.

Neither Mayor O’Brien nor Auditor David Griffing would comment on whether the city has plans to raise money through the sale of bonds, but it certainly is reassuring to know that the option is available — with very favorable terms.

The overall national economy is still strugging to get traction, which means that all government budgets are under pressure. Having a bond rating that sends a positive message to potential investors does ease the tension in Warren — somewhat.