John Brantley Airport Director

Authority's Credit Rating a Source of Pride
Editorial

North Carolina is a state long known for its fiscal conservatism. That conservatism manifests itself in the principle that moneys borrowed by its governmental units must be repaid without exception. As a consequence, some 20% of the unenhanced (by insurance or letter of credit) triple A (the highest) credit ratings in the United States are held by the State of North Carolina and its local governmental units. The close oversight of all proposed public debt financings within the state by the Local Government Commission, an office within the Office of the State Treasurer, the requirement for audit of all public debt issuers each year, and the long legacy of few instances of fraud or theft of public funds combine to afford North Carolina public agencies an excellent reputation in the financial markets.

In the Triangle region served by RDU, each of the Cities of Durham and Raleigh and the Counties of Wake and Durham holds a triple A rating on all of its general obligation bond debt. They are the four governmental units that underlie the Raleigh-Durham Airport Authority. The Airport Authority isn’t allowed to employ general obligation bond financing because it has no power of taxation, but it can and does sell airport revenue-backed bonds from time to time to finance capital improvements on the airport. No airport revenue bonds are rated triple A unless their repayment is guaranteed by insurance or a letter of credit. However, airport operators including the Airport Authority do hold underlying credit ratings that are assigned by one or more of the three credit rating agencies (Fitch, Moody’s and Standard & Poor’s) based on the strength of the operator’s finances. The top revenue bond credit rating is double A, and that rating has three levels, though no airport is rated at the highest of the three levels.

In 2001 when the Airport Authority reentered the general revenue bond financing market after a span of some 30 years, its credit was rated by Fitch and Moody’s at the top level of the single A category. That same rating was maintained in succeeding years as bonds were sold to finance construction of the large parking garage between the terminals and the beginnings of the Terminal C replacement program. This past May, the Authority prepared to sell the final series of bonds to finance the Terminal C program and sought a rating of those bonds by the two rating agencies. At that time, both Fitch and Moody’s determined the new bonds deserved to be rated at the lowest of the three double A levels and concurrently upgraded their rating of all of the Authority’s outstanding revenue bonds to the same level.

Today, the three rating agencies rate the credit of an average of only 11 airport operators nationwide double A. The Raleigh-Durham Airport Authority is now one of those 11. Only two of the 11 [Clark County, Nevada (Las Vegas) and the Seattle-Tacoma Port Authority] have a mid-level double A credit rating, and only two other operators of airports near the size of RDU hold a double A rating. The Airport Authority is very proud of its upgraded credit rating. It offers clear and compelling evidence of the excellence of our financial management and translates into significant savings in the amount of interest paid on borrowing. That and our annual financial audits also say to the airport’s tenants and users that the Authority runs a “tight ship”.

The Authority is firmly committed to the principles that what is borrowed must be repaid without exception and that our financial house must be fully in order and well secured at all times. Those are commitments you can take to the bank.

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