Anchorage’s finance bureaucrats pulled off a flurry of technical, but critically important tasks on a very compressed timeline in the last few weeks that culminated with $147 million being wired into city accounts on Thursday.
That money represents the will of Anchorage voters to invest in city and school infrastructure through debt to be repaid over time with property taxes – and it almost went awry.
The sequence of events all hinged on the completion of the 2022 version of a dense financial report that the city is supposed to put out every year, the Annual Comprehensive Financial Report, or ACFR.
The report is an exercise in government accounting and transparency: A bunch of end-of-year financial statements that summarize the city’s fiscal position, department by department, that an independent auditor has vouched for.
On paper, the 2022 ACFR was due in the spring of 2023, though these reports usually come out in the summer or fall. But because of dysfunction at the city and extreme turnover in the division responsible for bookkeeping and preparing for the audit, it was extremely late.
The progressive 907 Initiative even made the overdue report a piece of its “incompetence has a price tag” campaign last year that targeted then-Mayor Dave Bronson.
Sharon Lechner, Bronson’s last director of the Office of Management and Budget, lent her accounting expertise to the audit effort. She said she stayed on with the new administration for two extra weeks to see the report through, at the request of the new Mayor Suzanne LaFrance.
“This is a relief and also a cautionary tale,” LaFrance said at the Anchorage Assembly’s July 16 meeting, after announcing the completion of the 2022 ACFR. “We must get our municipal finances in order and ensure stability going forward.”
Alden Thern, the city’s chief fiscal officer, later said the completion of the financial report “happened at the latest possible time that it could’ve.”
Thern has the epilogue to this cautionary tale, but first, a little backstory. In April, Anchorage voters authorized $124 million in new city debt to pay for long lists of capital projects, from replacing the roof at Chugiak High School to resurfacing a mile of Northern Lights Boulevard to making parks more accessible to people with disabilities. The city also has quite a bit more debt capacity that voters authorized in earlier elections.
The city sells bonds in the financial markets to raise that money. To get the most favorable interest rates, the city needs an up-to-date bond rating, which is like a credit score. The better the bond rating, the lower the risk for the bond buyers. And the lower the risk, the lower the interest rates Anchorage’s property owners will have to pay for through their property taxes.
The bond rating agencies couldn’t rate the city without audited, up-to-date financial statements – the ACFR. But the city’s 2022 report was so late, Thern said it would only be current in the eyes of the rating agencies until July 28.
“That’s when the ‘23 financials are due, and we don’t have them, obviously, even started yet,” he said.
Thern said he prepped the bond rating agencies in advance with draft versions of the overdue financial report, and they were the first to get the final version on July 15.
Three days later, the city got a fresh bond rating. It slipped a notch since its last one in 2022, but Thern said that’s still better than no rating.
“The ratings help make the bonds more solvent, and as such, we get better pricing,” he said. “We could’ve sold bonds with no ratings, but they would’ve cost more money.”
The city’s bonds went on sale on July 19, terms were settled on July 22, and the deal closed and money wired on July 25.
Thern said normally, bond sales take two to three weeks to close. His office did it in one.
“It was a last gasp of the CFO trying to get everything done in that particular time period,” he said.
All told, the city raised $147 million at a competitive 3.734% interest rate. Thern said that should be enough money to cover the city and school district’s capital needs until 2026. With work just beginning on the 2023 ACFR, it’s not clear when the city will be able to sell bonds again.
Anchorage Assembly member Felix Rivera plans to begin the post-mortem on why the 2022 ACFR was so late in a committee he chairs on July 31.
In a press release, LaFrance noted that the latest bond rating report lays out clear steps the city can take to improve its rating.
“The municipality’s financial health is a priority, and my administration commits to strong fiscal management,” she said.
Jeremy Hsieh covers Anchorage with an emphasis on housing, homelessness, infrastructure and development. Reach him atjhsieh@alaskapublic.orgor 907-550-8428. Read more about Jeremyhere.
