Leading global fiscal rating agencies give City of Clarksville high marks

Both Fitch Ratings and Moody's Ratings recently praised the City of Clarksville's financial performance relative to bond ratings, budgetary flexibility and fiscal planning.

The agencies summarized in their official reports that the City of Clarksville achieved scores that signify it is financially sound, has adequate revenues and cash reserves to pay its debts, and has a low default risk.

Fitch is an American credit rating agency designated by the U.S. Securities and Exchange Commission.

Likewise, Moody's Ratings is a global company that provides credit ratings, research, and risk analysis for financial obligations.

Both Fitch and Moody's are among the financial industry's "big three credit rating agencies," along with Standard & Poor's.

"These separate, and independent ratings from two, key global financial agencies lend indisputable credence to the great confidence I have in our Finance Department, and Laurie Matta, our Chief Financial Officer," said Clarksville Mayor Joe Pitts.

"We can all feel comfortable with the sound budgeting decisions and practices in Clarksville City government, knowing they have this high level of endorsement from two of the most important credit rating agencies in existence," Mayor Pitts said.

Here's a breakdown of some of the key points included in both the Fitch and Moody's findings:

Fitch assigns AA+ rating

Fitch Ratings has assigned a AA+ rating to the City of Clarksville's General Obligation (GO) bonds.

The rating outlook for the City is "stable," said Fitch, in its report. An AA+ rating is a high-quality investment-grade debt rating that indicates a low risk of default and a strong likelihood of repayment.

Fitch said the AA+ IDR (Income-Driven Repayment) and GO bond rating reflects Clarksville's financial resilience assessment based on its "Ample" level of budgetary flexibility. The bonds are General Obligations of the City backed by its full faith and credit, and unlimited taxing power.

Unrestricted City General Fund reserves are currently at a comfortable level, said Fitch, and the ratings also incorporate the City's strong population growth trend.

Fitch said Clarksville's financial resilience is driven by the combination of its "High" revenue and expenditure control assessment, culminating in an "Ample" budgetary flexibility assessment.

The City's current-year fund balance-to-expenditure ratio is a healthy 37.3%.

To clarify, fund balance dollars are those funds that the City has available for unplanned events without the need for drastic cutbacks that negatively impact staffing or the delivery of critical public services.

In essence, the fund balance is the working capital or savings the City must maintain to weather negative economic trends and unforeseen circumstances such as the December 2023 tornado or Covid pandemic.

Maintaining a healthy and appropriate fund balance level will help mitigate current and future risks and ensure stable cash flow. Despite ever-increasing costs and fluctuating economics, Clarksville city government has managed to keep City operations fiscally sound, stable, and steady.

The population growth trend combined with economic concentration and population size are in the "Strongest" assessment category. Fitch said Clarksville's population in 2022 was of sufficient size, and the economy was sufficiently diversified to qualify for Fitch's highest-overall size and diversification assessment category.

Moody's assigns an Aa2 GO bond rating

Separately, Moody's Ratings has assigned an Aa2 General Obligation Unlimited Tax (GOULT) rating to the City of Clarksville's proposed $45.1 million GO Bonds, Series 2024A and proposed $7.1 million GO Bonds, Series 2024B (Federally Taxable).

Moody's maintains an Aa2 issuer rating on the City, and an Aa2 rating on its outstanding GOULT debt.

An Aa2 rating is a long-term credit rating given to fixed-income securities by Moody's, that indicates a low risk of default and a strong credit profile for the issuer. It is considered a safe investment and a reliable source of stable income for investors.

The Aa2 issuer rating reflects the City's strong available fund balance ratio. Moody's said reserves will remain healthy over the next two years. The rating also reflects the City's expanding economy.

The stable outlook reflects the expectation that reserves will remain stable despite growing leverage while the City's economy continues to expand.

Moody's, too, noted that the City's governmental bonds are GO bonds, and as such, the full faith, credit and taxing power of the City are irrevocably pledged for the payment of the principal and interest until maturity.

The City of Clarksville received high marks in its credit impact score for having low exposure to environmental and social risks, and favorable governance.

"The City (of Clarksville) has satisfactory transparency and disclosure with annual reporting," Moody's wrote. "Moreover, the City has a history of strong budget management and favorable policy credibility and effectiveness."

"On behalf of the entire City of Clarksville Finance Department, it is truly gratifying to know that a prestigious independent analysis - from two separate and independent credit rating services - of our fiscal policies and budgeting practices, is summarized by very positive results and feedback," said City Chief Financial Officer Laurie Matta.

"We are delighted to again receive these high marks, and determined to maintain a consistent track record of excellence going forward," she said.

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