City of Cedar Rapids retains long-held top Aaa bond rating

Neither a historic flood nor lingering national economic woes has shaken the city's grip on its long-held, top Aaa bond rating.

Moody's Investors Service on Friday once again certified the Aaa bond rating as they city prepares to sell $33.3 million in new debt using general obligation bonds.

The top Aaa bond rating, which the city of Iowa City also enjoys, allows the city to borrow money at better interest rates than would be the case with a lower bond rating.

Moody's also affirmed its earlier Aaa bond ratings for the rest of the city's existing outstanding general obligation debt of $261.4 million, the rating service states in a news release.

Moody's notes that the city's municipal debt is secured by “the city's unlimited taxing authority.”

The rating service goes on: “The city's gilt-edged rating reflects the city's large and diverse economy and role as a regional service center (and) strong financial management practices and healthy financial flexibility.”

Moody's also notes that the city government maintains “satisfactory” financial reserves “despite” recent draw downs on those reserves. The city has tapped its reserve funds to pay some flood-recovery-related expenses, and it also is tapping into the reserves in the fiscal year beginning July 1 to balance its general operating budget.

Moody's calls the city's debt position “manageable.” The rating service also anticipates “significant future borrowing” to finance ongoing improvements and flood-recovery projects.

The city also is selling $13.6 million in revenue bonds to pay for work at its Water Pollution Control facility and in its sanitary-sewer system and $8.37 million in revenue bonds for work at the city's water treatment plants.

These revenue bonds have been certified for an Aa2 bond rating, two steps below the Aaa rating in Moody's 21-step bond-rating system.

Revenue bonds, which the city of Cedar Rapids has used sparingly in its recent history, command a lower bond rating because they are supported by fee-based revenue at the city utilities and not the full taxing authority of the city.