As part of a bond refunding, Moody’s Investor Services issued an opinion on the city’s credit worthiness and general financial health.
The opinion, issued Oct. 6, reaffirmed the city’s bond rating, Aa3, which is Moody’s fourth-highest long-term rating.
Moody’s praised the city administration’s management, writing, “Management is strong as evidenced by the adoption of and adherence to a comprehensive set of formal financial policies. Additionally, the city maintains a long-range capital improvement plan to help prioritize and guide capital investment.”
It noted the city’s credit strengths, which it regards as:
- Sizeable tax base with strong redevelopment potential
- Stabilizing presence of higher education and healthcare institutions
- Trend of balanced financial operations
- Conservative approach to budgeting revenues and managing expenditures
While acknowledging there’s been no large change since its previous opinion, written in July 2016, Moody’s noted, “Fiscal 2017 year-end operations in the General Fund are positive.
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“The City Council has adopted seven updates to the city’s five point plan (long term financial plan). The updates … will help to control and mitigate the recent rise in the city’s debt burden that we consider to be the primary credit challenge to the city over the near term.”
Indeed, the city’s high debt burden, which has risen from 112 percent of operating revenue in 2012 to 138 percent in 2016, and its continued growth are recognized as factors that could lead to a credit downgrade in the future.
Additionally, Moody’s notes that “moderate” reliance on state aid presents another challenge and that a decline could adversely affect the city.
The city’s current growth and prospects for future expansion of the tax base continue to be positive developments.
Moody’s notes that assessed property values have increased for four straight years and that “Economic revitalization efforts and leveraging of the city’s medical and higher education sectors have contributed to steady but modest commercial redevelopment.”
At the same time, long-term liabilities for debt, pensions and other post-employment benefits (OPEB) are “well above average” and increasing.
Politics and expediency dictate the focus be placed on solely the good news or the bad news. But much like a doctor’s visit, the truth is a mix.
In this vein, the patient is in good shape, but continued good health is not assured. It needs to continue leading a healthy lifestyle or it risks serious consequences.