Our local media have created much confusion over the City of El Paso’s bond ratings, with KTSM, followed by the El Paso Times, and now KFOX incorrectly describing the AA+ rating assigned to our City’s general obligation debt by the Kroll Bond Rating Agency (KBRA) as an “upgrade.”
I have attached the City’s mendacious news release for your reading pleasure, courtesy of the Ministry of Truth!
As I wrote on Sunday (below), Kroll is a recent and minor player in the bond rating industry and had never rated our City before, so there is no upgrade. Each credit rating agency has its own metrics and so a AA+ rating from KBRA cannot be considered an upgrade by any definition.
The Big Three ratings agencies that set the industry standard—Fitch, Moody’s and Standard & Poor’s—have not upgraded their ratings for our City.
In fact, just yesterday Fitch affirmed its AA rating on our GO debt for the first time since 2014, but assigned a lower rating (AA-) to the $62 million in outstanding debt on our Ballpark.
Standard & Poor’s assigned our City a rating of AA in 2013 and has not rated our GO debt since.
As for Moody’s, as far as I can tell, the last time they rated our City’s general obligation debt was on September 16, 2009, when it assigned a rating of Aa3, the fourth level on their scale.
We last heard from Moody’s on December 10, 2019, when they warned that in the event of a recession of similar severity to the 2008-2009 downtown, El Paso will be one of four cities (including Detroit) in which “adjusted net pension liabilities will rise by more than 100% of revenue.”
So the AA+ rating from Kroll may be justly described as a nothingburger without any beef, cheese, tomato, or ketchup.
KFOX REPEATS THE CITY TALKING POINTS
On the heals of the erroneous reports by KTSM and the El Paso Times, Robert Holguin of KFOX aired the most misleading report of all, parroting the City’s talking points uncritically. It is worth analyzing his first four sentences.
1. “El Paso’s credit score just got better – something that hasn’t happened since the 1990s.”
No it did not. One minor ratings agency that nobody has heard of, Kroll, assigned its first-ever credit rating to El Paso, according to its own metrics. None of the Big Three agencies—Fitch, Moody’s or Standard & Poor’s—changed its ratings.
2. “And it could save taxpayers millions of dollars.”
No one pays attention to Kroll so its rating for El Paso will not affect the interest rates on the City’s future bond issuances.
3. “When it comes to the city’s bond ratings, El Paso has gone from AA, to AA-plus – the second-highest ranking.”
Again, Kroll assigned its rating for the first time and so there is no upgrade.
4. “So bottom line, the City of El Paso will be able to borrow money at lower interest rates.”
This is Holguin taking the City at its word and inserting his personal opinion into his report, a real journalistic no-no. His conclusion is incorrect. He could have gotten this right by asking any bond attorney or broker.
The real “bottom line” is that our local anchors and reporters need to educate themselves about bond ratings and how they work, and they should never take our City at its word but fact-check and question everything.
Enjoy your evening.
Max