Cave Creek earns A‑1 bond rating
Town’s debt mounting
by Brian DiTullio

CAVE CREEK – Purchasing a water company helped Cave Creek’s bond rating, but the town now is carrying more debt than the “median” levels.

Financial consultant Mark Reader related that information to town council at its June 18 meeting. Existing general obligation bonds for Spur Cross Ranch Conservation Area were upgraded by Moody’s Investor Service from A‑2 to an A‑1 rating, and the new Cave Creek Water Company revenue bonds have been rated A‑1.

Reader reviewed the town’s recent financial transactions and talked about its credit rating. In his report, he stated the purchase of Cave Creek Water Co. was “efficient and timely,” noting the town chose the right time for a Water Infrastructure Finance Authority loan, as the interest rate assigned to the loan is very low.

He pointed out that the last few weeks have seen a rapid rise in interest rates and the 3.64 percent obtained a few weeks ago wouldn’t be possible today. The WIFA loan closed on June 8.

However, the town’s debt burden is “somewhat high,” Reader said, but should remain manageable–as long as the economy remains steady.

Councilman Gil Lopez interrupted Reader at that point, asking him to clarify the statement. Reader responded that, as long as there isn’t a “meltdown” in the economy,  the town should be able to manage all its new debt incurred during the past year.

He noted that if Cave Creek’s revenues fall significantly, the council could consider higher property taxes and/or a water rate hike.

Reader also explained the four major investment‑grade credit rating categories: AAA, AA, A, and BBB, with gradations of 1, 2 and 3 assigned to each to show relative standing within the category. In addition, he stated the town’s next goal is a rating of AA3 for the general obligation bonds.

Positive factors affecting Cave Creek’s credit rating include steady population growth, its tax base and current debt burden, according to Reader, explaining the town’s full market value per capita, at $196,000, is well above similarly rated municipalities.

The town’s consultant also explained socioeconomic indicators are well above the average in Arizona, with per capita family income at 188 percent of state levels and median family income at 164 percent.

As for Cave Creek’s tax base, he reported the full market value of taxable property has increased 14.5 percent from 2001 and that the tax‑base concentration is less than 10 percent, meaning the town has a diverse economy from which to draw tax revenues.

Reader concluded his presentation by stating the next financing project on the table for town council is the new wastewater treatment plant project.