Meeting Fiscal Challenges

The financial picture of a municipality is never constant and fiscal challenges can appear from nowhere. The responsibility and cost of governing and maintaining public safety can seem overwhelming in the face of fiscal concerns.

Liberty devises strategies to help clients:

  • Demonstrate leadership and clarity of purpose
  • Achieve constituent buy-in
  • Resolve credit rating agency concerns

Leadership and Clarity of Purpose

We advise municipal clients that it is important to have an action plan in place to help demonstrate leadership when confronted with any “bad news” scenario. It’s simple. An action plan can help you meet the challenges ahead with conviction and purpose.

Target Constituency

Liberty’s leadership has regularly chaired public hearings and is often called upon to present complicated financial information at public meetings. We use techniques to keep the message simple and strive to answer questions plainly, with short explanations in three minutes or less. We recognize that difficult-to-understand explanations may frustrate constituents and detract from the overall plan. Because simple explanations are more easily repeatable, they empower meeting attendees to repeat and deliver the correct message to non-attendees and obtain constituent support.

Credit Rating Agency Concerns

When credit rating agencies deliver bad news, we believe the numbers become the message and the action plan for resolving the problem should be made clear with these three steps:

  1. State what you intend to do
  2. Follow through and do what you say, and
  3. Make sure that what you say and what you do will resolve the underlying fiscal problem. Keep in mind that projections should be reasonably attainable.

The following case studies illustrate two typical problems with credit rating agencies and how Liberty was able to resolve them. Note: Under varying market conditions such savings may not be available.

CASE STUDY 1: Downgrade avoided despite operating deficits

ISSUE SIZE: $2,771,500
TERM: 15 Years
NET INTEREST RATE: 3.73%
SUMMARY: Subsequent to receiving a credit rating increase on its bonds, this issuer experienced two years of operating deficits, drawing down on its fund balance by 18.6%. Working closely with this client, we evaluated the reasons for the draw-down and the client’s capability for rebuilding fund reserves before the rating interview. The client’s credit rating was reaffirmed.

CASE STUDY 2: Junk status avoided – $1.5 million in estimated interest cost savings

ISSUE SIZE: $22,085,000
TERM: 20 Years
NET INTEREST RATE: 4.95%
SUMMARY: In conjunction with our ongoing monitoring of credit markets and issuers, we alerted this issuer of its risk of being downgraded to “junk” status, although they were not a client at the time. They engaged us and we quickly completed a formal credit review and ratings action plan. Two months later, as we anticipated, this issuer was placed on “watch list” for a possible credit rating downgrade. Having a plan in place helped prevent this issuer from being downgraded and allow it to successfully sell a much necessary $22 million bond issue at a reduced interest rate.


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