Coralville wants help with poor credit score

City staff want outside help in addressing Coralville's sinking bond ratings.

City officials are asking the City Council on July 23 to approve a contract with Springsted Inc. of St. Paul, Minn. The consulting firm would help the city develop a strategy for working with credit rating agencies, including Moody's Investors Service.

“I think it demonstrates that the city takes seriously the Moody's action and is interested in making sure, the staff and the elected officials, that we react to it appropriately,” Tony Roetlin, Coralville's finance director, said Friday.

Last month Moody's downgraded several bond ratings for Coralville. The ratings are similar to a person's credit score and are often viewed as being indicative of financial health. A lower rating means higher borrowing costs for a city.

Coralville's main rating has dropped six notches since April 2012 and was given a “negative outlook” by Moody's. The agency takes issue with Coralville's high level of debt and its financial involvement in what it considers non-essential government purposes, including a hotel, golf club, performing arts center and brewery.

Kevin O'Brien, who owns McDonald's restaurants in Coralville and is a member of a group that has been critical of the city's financial practices, knocked the city's intention to hire an outside consultant, saying the city for years has been told by its financial advisor and through bond rating reports what it needs to address .

He said the business people and others involved in his group, Citizens for Responsible Growth and Taxation, have been rebuffed in requests to sit down with city leaders and discuss the problem.

“The people, the citizens who helped build this city, will do it for free,” said O'Brien, who was part of a group that sued Coralville over a multimillion-dollar deal for a Von Maur department store.

City Administrator Kelly Hayworth said municipal finance is a specialized field and expertise is required. Springsted said it obtains about 250 ratings a year for its clients, which include the University of Iowa.

In a memo to Roetlin this month, Barry Fick, Springsted's senior vice president, said his company would develop a comprehensive plan to work with credit rating agencies.

“The goal of the plan is to help them better understand the specific situation of the City of Coralville and be able to relate the specific strengths of Coralville to their individual rating agency credit models,” he wrote.

City officials in the past have been frustrated by Moody's ratings. Hayworth and Roetlin said part of the goal would be to try to explain the city's view on its financial condition to rating agencies.

Hayworth said the city took action in response to a Moody's downgrade a year ago and believes it's in good financial shape. But the city “obviously” is using the wrong measures, he said.

“So I think someone with a fresh set of eyes and (who) is very knowledgeable, which Springsted is, can help us with” explaining the city's position, he said.

Springsted also would help the city remedy the concerns expressed by the rating agencies, Hayworth and Roetlin said.

Springsted's work would take about nine weeks.

If the City Council approves the hiring of the firm, as is expected, Springsted would be paid no more than $14,000 in fees, plus reimbursable expenses.