Town credit rating improves; MLLA loan could be affected

December 21, 2012

Dave Wilbrecht, Mammoth Lakes Town Manager and Marianna Marysheva-Martinez, Assistant Town Manager. Photo/George Shirk

Mammoth is back in the pink.

A major national credit ratings service on Wednesday declared Mammoth “stable,” lifting the town from the dregs of a “highly vulnerable” credit rating in the wake of settling its legal battle against Mammoth Lakes Land Acquisition (MLLA).

Assistant Town Manager Marianna Marysheva-Martinez delivered the news to the Town Council at its meeting Wednesday evening, just hours after Standard & Poor’s Rating Services raised Mammoth from a “C” rating to “BB+.”

Standard & Poor’s (S&P) is one of three credit agencies that measure credit risk by governments. The two others are Fitch and Moody’s. Mammoth has always used the S&P rating for its debt ratings.

Marysheva-Martinez said the timing of the new rating caught her a bit by surprise—that she and Town Manager Dave Wilbrecht had not expected a new rating until mid-January or February.

With a better bond rating, she said afterward, the town is likely to re-finance the MLLA settlement arrangement by shortening the length of the payback from its current 23-year schedule.

The town’s $2 million-a-year payment schedule already is figured into the town’s long-term budget forecasts, and she said she saw no reason to change that part of the payment configuration yet.

Marysheva-Martinez spearheaded the town cuts in the 2011-12 “shortfall budget,” then led the effort to restructure the town government in the wake of the MLLA settlement.

The restructuring measure passed the council Dec. 5.

Marysheva-Martinez explained the implications of the new S&P rating by comparing it to a credit score that any individual receives.

“A credit score should be relatively high,” she explained, “because it will affect the amount of interest you pay on such things as credit cards, a car loan, or a mortgage. The lower the credit rating, the more you pay.”

In terms of Mammoth, the cost of its $23 million payment to MLLA currently is set at 5.17 percent over 23 years.

The way this kind of thing comes into play is if the town wants or needs credit for a major purchase.
When the town financed a loan for the purchase of the Bell-Shaped Parcel at Minaret Road and Meridian Blvd., it did so by earning a high credit rating from S&P.

The S&P report effectively endorsed the town’s restructuring, which drastically cut police services and public works, and it took heavily into account Mammoth’s withdrawal from Chapter 9 municipal bankruptcy proceedings.

“In our opinion, while Mammoth Lakes filed for Chapter 9 in July 2012, its withdrawal of the petition and the town council’s recently adopted multi-year budget restructuring plan to accommodate the settlement payments somewhat mitigate our concern about the town’s future willingness to pay debt service.”

The S&P report said it also based its opinion on the upgraded credit status because of council’s adoption of the bare-bones budget.

“We believe if implemented, [the restructure effort] could restore structural balance to the general fund in the next two years and eventually build general fund reserve levels to slightly higher levels.”

The report also took into account “what we consider good-to-strong income levels.”

It is the best credit rating Mammoth has received since 2009