Cedar Rapids gets 38th consecutive Aaa bond rating from Moody's

CEDAR RAPIDS - It's part of the city's identity - the top Aaa bond rating.

And on Tuesday, Moody's Investors Service bestowed its top Aaa rating on the city of Cedar Rapids for a 38th consecutive year, City Manager Jeff Pomeranz reported.

The top bond rating allows the city to sell bond debt at more-favorable interest rates and to attract more bidders to compete for the bonds.

Pomeranz noted that only 199 cities nationwide and only four in Iowa currently enjoy a Aaa bond rating from Moody's. The cities of Iowa City, Ames and West Des Moines, where Pomeranz worked before coming to Cedar Rapids in September 2010, are the other Iowa cities.

“We are very pleased,” Pomeranz said of the rating. “The Moody's report is optimistic about the city's financial position, its management and its conservative budgeting.”

At Tuesday night's City Council meeting, Jon Burmeister, senior managing consultant with The PFM Group in Des Moines, applauded the city for being able to impress Moody's analysts with a solid financial performance despite “all the adversary throw at you” by the flood of 2008.

City Council member Justin Shields asked Burmeister, who advises the city on its bond sales, how many of the other 199 cities in the nation with a Aaa bond rating had been forced to recover from a $5 billion to $6 billion disaster. Burmeister doubted there were many.

Pomeranz said Moody's took note of the city's “high level of reserve funds,” which he said now equal about 31 percent of the city's almost $100-million annual general-fund budget. The Moody's report notes that the city's general fund had reserves of 35.9 percent at the end of the budget year on June 30, 2010.

The city manager said the rating agency also tied the city's bond rating to the overall economic health and economic diversity of the city.

The Moody's report does note that the city of Cedar Rapids has an “above-average debt burden” with plans in future years for additional borrowing, including borrowing for the city's Convention Complex and hotel renovation projects. The report says the city anticipates spending $25.6 million in local funds on the complex and $28 million on hotel renovation.

Moody's new report was a prelude to the City Council vote last night to approve its annual sale of general obligation bonds to raise funds for public improvements. The total bond sale was for $33.11 million. The proceeds from one group of $25.83 million in bonds will be used for various capital improvement projects; the proceeds from a second group of $6.14 million in bonds will be used for improvements to flood-damaged facilities and for renovations at the U.S. Cellular Center; and proceeds from a third group of $1.14 million in bonds will be used to purchase software for the city's parking garages and for skywalk repairs, according to the Moody's report.

The council also approved the sale of $34.22 million in refunding capital loan notes to refinance existing debt at more favorable interest rates.

Burmeister said the competition among bidders from across the country allowed the city to sell its bonds at interest rates lower than he had earlier estimated. The refinancing alone will save the city more than $3 million, he said.

In addition, the council approved the sale of $6.435 million in water revenue bonds to make improvements at the city's water plants. Moody's has assigned a slightly lower bond rating for the revenue bonds because only water fees, not the full backing of city government, supports the revenue bonds.