FirstSouthwest recommendation to City of Oxnard in connection with Measure M passage
In light of voter approval of the repeal of the wastewater rate increase, the City of Oxnard’s financial adviser, FirstSouthwest, has provided an analysis to assist the City in making decisions regarding compliance with current debt obligations, maintenance of market access for future capital borrowings, and establishment of financial management best practices so that the transaction and interest costs of future borrowings do not unnecessarily increase.
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City of Oxnard’s wastewater and general funds placed on negative CreditWatch by Standard and Poor’s
OXNARD, Calif.–Standard and Poor’s (S&P) placed both the City’s wastewater and general funds on CreditWatch with negative implications, effective Nov. 22, 2016. Below are summaries of S&P’s reports. The full reports detailing the rationale behind S&P’s decision are available on the City’s website at www.oxnard.org/financialoutlook.
In its report on the City’s wastewater fund, S&P stated that its decision to place the wastewater fund on negative CreditWatch is based on significant financial stress the wastewater system could experience during the next 90 days depending on the following factors:
- Near-term decisions made by the City Council on how to proceed now that Measure M was passed
- The court’s decision of whether to grant a stay of Measure M should the City continue to pursue litigation
- Decisions made by Union Bank and the Royal Bank of Canada, the City’s financial partners, which could result in significant draws on the wastewater system’s cash reserves
In its report on the City’s general fund, S&P stated that it placed the general fund on negative CreditWatch based on two factors that could strain the City’s general fund:
- The potential that the City may need to borrow money from other unrestricted funds including the general fund to cover the wastewater system’s debt service payments
- The financial risks associated with the wastewater fund’s poor credit rating and low cash reserves, which could include borrowing from other unrestricted funds
“The negative financial outlook for both funds will have a severe financial impact to ratepayers and the City of Oxnard including increased borrowing costs for the City and higher wastewater rates for residents,” said City Manager Greg Nyhoff.
“Unfortunately, the rate repeal is a cause for concern for Standard and Poor’s, which has chosen to reevaluate the stable outlook it issued two months ago for the general fund,” Nyhoff said. “It’s important to keep in mind that the general fund collects tax revenue to pay for critical services including police, fire, library and recreation operations.”
During the Nov. 29 City Council meeting, City Manager Nyhoff and Chief Financial Officer Jim Throop will present a report that outlines the complex financial implications of the wastewater rate repeal in greater detail. The City’s financial advisers will also be at the meeting to further explain the ramifications of S&P’s decision.
Residents are encouraged to attend the Nov. 29 meeting. Spectrum subscribers can watch the meeting on Channel 10, and Frontier Communications customers can tune in to Channel 35. The live stream of the meeting can be accessed at www.oxnard.org/city-council-meetings.
The City of Oxnard is a full-service general law city incorporated in 1903. Oxnard is the largest and most populous city in the County of Ventura, serving 200,000 culturally diverse residents. Read more about the City of Oxnard at www.cityofoxnard.org. Follow us on social media at www.twitter.com/CityofOxnard (@CityofOxnard), www.facebook.com/CityofOxnard and www.vimeo.com/cityofoxnard.
FOR IMMEDIATE RELEASE: November 22, 2016 #079-16
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