NEW ORLEANS - Fitch Ratings upgraded its investment-grade bond rating for New Orleans Monday, saying the financial picture for the city devastated by Hurricane Katrina less than 4 years ago has stabilized.
This comes less than a month after Moody's Investors Service affirmed its investment-grade rating and is seen as another sign of recovery. But with local officials hoping to sell $80 million in bonds for infrastructure work this year, the big question is: What will Standard & Poor's will do?
Standard & Poor's had rated the city at below investment-grade after the 2005 hurricane, and officials see an upgrade to investment grade as critical to the bond sale prospects.
Without that upgrade, "market access will be extremely limited and very expensive," Peter Kessenich, a financial adviser to the Board of Liquidation, City Debt, said in an e-mail Monday.
Before Katrina, voters approved a $260 million bond issue for roads, public infrastructure and other work. The city sold $75 million in bonds in 2007 and hoped to sell $80 million in 2008.
But the board in October delayed the planned $80 million sale due to the Standard & Poor's rating and what Kessenich called "lousy" market conditions. City officials hoped for a sale in early 2009 to keep public works and other projects on track, but the board has been waiting to hear from the rating agencies before deciding its next step.
Representatives of the three agencies visited the city in March. The findings by Standard & Poor's are expected soon and Kessenich said he's optimistic about the city's prospects for the desired upgrade.
Public Works Director Robert Mendoza said about one-third of his $600 million rebuilding program is dependent on bond funds, and that segment of projects would essentially grind to a halt if the planned sale does not take place this year. He said he's already running out of funds from the previous sale and is waiting on a new infusion of cash to put out some bids for work and begin design on others.
Other segments of the public works' program include projects that are federally backed and not affected by the bond funding.
Fitch, in its report Monday, noted that the city still faces years of recovery and plenty of work in key areas such as housing, health care, public infrastructure and education.
But it also cited gains in property tax collections, a population at about 70 percent of the pre-Katrina level and rebuilding aid in its assessment that New Orleans' financial profile had stabilized. The city, which has relied on federal loans to prop up its budget since the storm, also hopes to be self-sufficient by 2011.
The level of rebuilding aid flowing to the region "is providing a measurable boost to economic activity during the current (national) recession and will establish a solid foundation for future economic growth," the agency said.
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