DAPHNE, Ala. — Standard & Poor’s Rating Services raised the city of Daphne’s bond rating from A+ to AA last week as Moody’s Investor Services improved its rating of the city from A1 to AA3, and the improvements could have a quick and noticeable impact on the city’s finances.

Daphne’s rating of AA is two levels beneath the highest rating offered by S&P. In a press release announcing the upgrade the city said the “upgrades reflect the ongoing commitment of the city’s elected officials and management staff to make wise, financially responsible decisions.”

Daphne Mayor Fred Small said the city will benefit from the improved rating.

“In practical terms, with anything we do as far as money we should be getting a cheaper interest rate, and that’ll help,” Small said. “This does show the financial stability of the city.”

Bond ratings reflect credit worthiness, or the risk investors assume in the purchase of debt obligations from a municipality like Daphne, a corporation, state or financial institution. S&P long-term bond ratings run from “D,” the lowest, to “AAA.” Baldwin County bonds, for example,  are rated AA+ by S&P, one level beneath the highest ranking.

Immediately, Small said, the city could benefit from the refinancing of previously issued debt.

“Where you may see a difference is in the refinancing of some older bonds that were issued at a much higher rate,” Small said. “This could allow us to knock quite a few years in payments off.”

Bond ratings are based on an institution’s revenues, outstanding debts, management and projected growth.

Moody’s cited “a healthy financial position giving conservative budgeting of the city’s major revenue, sales tax, track record of increasing reserves and management's stated goal of maintaining an undesignated unreserved fund balance of 20 to 25 percent of revenues.”

Daphne’s Finance Director/Treasurer Kim Briley said the city currently has about $31 million in general obligation debt. The rating improvement, she estimates, could save the city thousands of dollars. Briley said the specific area of savings for the city would be in the insurance rates the city could get for refinanced debt.

“We have outstanding debt for sewer projects, the civic center and  the new City Hall,” Briley said. “When we get ready to borrow or refinance this brings down the cost of the insurance associated with the bonds, which brings down the total amount of the bonds.”

Small said he doesn’t anticipate the city issuing more bonds any time soon.

“We should take this cautiously as city leaders,” he said. “We need to be very careful of going out and borrowing money in times like these, but in today’s market to be able to get reclassified to these standards is really great. It’s impressive.”