DALLAS -- Nearly two months into fiscal 1993, Moore, Okla., officials said they will cut $1.1 million from the city's current budget after AMBAC Indemnity Corp. declined to insure a controversial budget-balancing debt restructuring.
City Manager Jay Newton said the city has abandoned plans to competitively sell a $29 million taxable deal that would have raised the principal outstanding to $104 million from $63 million for the city-created Moore Public Works Authority.
After learning that AMBAC would not insure the refunding, the city council earlier this week approved several cost-cutting steps to balance the budget for fiscal 1993, which began July 1.
"AMBAC had indicated that they have no interest in insuring the issue," said Mr. Newton, who added that other credit enhancement was not available. "There doesn't seem to be much interest out there."
Even though city officials originally said they could sell the debt restructuring without bond insurance, Mr. Newton conceded that a stand-along deal would not have given Moore the annual savings it needed to balance its budget.
Asked why AMBAC declined to insure the refunding, the city manager responded, "If they have any concerns, they haven't indicated what they are."
Moore Mayor Debe Homer said the city's financial adviser, Stifel, Nicolaus & Co. in Oklahoma City, told her the insurer's decision was prompted by articles in The Bond Buyer about the city's financial situation. Stifel officials could not be reached for comment.
A senior AMBAC official said, however, that the decision was based on economics, not headlines. The source said the debt restructuring would have meant a substantial increase in debt for the authority and risk for the insurer.
AMBAC currently insures all the outstanding debt of the public works authority, which carries a triple-A rating. Both Moody's Investors Service and Standard & Poor's Corp. rate the city's general obligation debt A. But the outstanding $10.3 million of that GO debt is insured by Capital Guaranty Insurance Co., which means the bonds are triple-A rated.
The decision not to proceed with the budget-balancing refunding issue forced Moore officials this week to propose cuts in the city's $14.6 million general fund.
Mr. Newton said reductions include lower capital outlays, elimination of moneys that were to help build a senior citizens center, and $150,000 that will be saved by not filling vacant positions.
Projected overtime and merit pay raises will be reduced in fiscal 1993 but the size of the city's work force will not be affected, officials said. The city also canceled plans for one-day weekly furloughs for its employees after contract workers won the right to be exempted from the measure.
The furloughs were expected to save $25,000 a week, but Mr. Newton said contract workers accounted for 60% of that savings.
For the mayor the decision to scrap the bond sale, approved before she and the new council took office this spring was a victory. Mrs. Homer has proposed budget cuts and short-term borrowing over a costlier debt restructuring to solve the city's financial problems.
"I'm not very fond of some of the measures we're using, but it takes a little here and a little there," the mayor said. "It's much better than the refinancing."
Still, Mr. Newton said the city could face several tight budgets in the coming years, and adding that the restructuring would have fixed budget problems that go beyond this year.
He said, however, that future budgets will be helped by the council's already approving stepped-up rates to the city's water customers. Because any shortages in paying the utility debt are covered by the general fund, future budget deficits should be smaller.
"In anticipation of the restructuring of the debt, we had set into place the new utility rates already," he said. "That should help us some."