City officials to plead case to bond-rating agencies Meeting next month on 'negative outlook'

Finance

March 27, 1998|By William Patalon III | William Patalon III,SUN STAFF

Baltimore officials -- including Mayor Kurt L. Schmoke -- have an April 21 date in New York City with three of the key municipal bond-rating agencies, where the city leaders will plead their case that Baltimore is not in a downward economic spiral.

On Tuesday The Sun reported that Moody's Investors Service Inc. had soured on Baltimore's economy because of urban flight, a decline in the city's tax base and thin financial reserves. Several area officials said the pronouncement by Moody's was a serious blow to the city's reputation, ability to attract new businesses and to the Schmoke administration itself, which has touted itself for fiscal prudence.

At his weekly news conference yesterday, Schmoke took issue with the stance by Moody's -- one of the most prestigious of the debt-rating agencies -- that there is a "negative outlook" for the city's economic future. This negative outlook will be contained in a report Moody's plans to release today. The report could lead to a review of Baltimore's credit rating, though not until next year, if at all.

For now, however, the pessimistic outlook represents a blow to a city that has been slow to emerge from the recession of the early 1990s.

"The important thing is that they have not put us on a credit watch," Schmoke said. "They have written this report using, we believe, old data that does not look at some of the very positive trends that have occurred, particularly that the city has finally felt the impact of the lift in the national economy and in the state economy."

Companies or municipalities are usually put under a "credit watch" when one of the debt-rating agencies has concerns about its financial strength. A downgrade in that rating means the firm or municipality is more of a lending risk, meaning borrowing costs rise. A downgrade from its current rating of A1 for its general obligation bonds could hurt Baltimore since the city plans to sell about $25 million in bonds during its 1999 fiscal year.

However, Schmoke said, the city's future is not as gloomy as the Moody's report hints.

"For example, last year we received more in income tax revenue than in the entire history of the city of Baltimore -- $126 million in just income tax revenue, which is way above anything we've ever had," he said. "Home ownership is up, property assessment values are up, leasing activity is up downtown, sales activity of downtown property is at record levels."

While it tries to improve Moody's perception next month, Baltimore officials also will be making their case to Standard and Poor's Inc. and Fitch -- two other important bond-rating services.

Baltimore has experienced population flight -- its population had dipped to 675,000 as of the last census -- and Schmoke said the city's days of having 950,000 residents are a thing of the past. But he said it's reasonable to project a population of 700,000, helped by new housing programs that have propelled home ownership to nearly 55 percent.

Pub Date: 3/27/98

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