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Ratings agency downgrades Surprise bonds


For the second time in a week, a national credit-ratings agency has downgraded Surprise's bond rating in light of an audit that found major financial missteps.

Fitch Ratings, one of the "Big Three" ratings agencies, has moved a 2003 series of bonds to A+ from AA-. The bonds were issued to help build the city's Recreation Campus and police and fire headquarters, among other projects.

The agency on Tuesday also downgraded the city's implied general obligation rating to A+ from AA-.

Bond ratings, similar to a person's credit score, affect the city's ability to obtain better interest rates on future bond borrowing. The downgrade could make selling general bonds or refinancing the city's debt more expensive.

"The downgrade from Fitch was expected," Mayor Sharon Wolcott said in a statement. "It is a pill we have to swallow, but we have strong revenues, are open for business, and our day to day services are unaffected."

On Thursday, Standard & Poor's, another large ratings agency, downgraded Surprise's general bond rating from AA to A. City officials said that downgrade was also an expected blow.

• Surprise's bond rating downgraded from an AA to A

And more downgrades could be in the city's future. Fitch has revised its outlook for the 2003 and general obligation ratings to "negative" from "stable," indicating it could drop the ratings further if the city's reserve funds and financial condition are eroded further.

In its news release, the agency cited reasons for the city's downgrade: General fund reserves have been decimated by accounting errors, limiting its financial flexibility, and the city will not receive a "clean" audit opinion for its 2011 books, meaning a more in-depth review is needed and could uncover additional errors.

Fitch sustained an A- rating for the city's 2007 bonds series, which were issued to build a wastewater treatment facility. However, the agency changed its outlook for the rating to "negative" from "positive."

Last September, Fitch downgraded Surprise's 2003 bonds to AA- from AA after similar accounting errors came to light.

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