Cedar Rapids credit outlook ‘stable’

CEDAR RAPIDS - Cedar Rapids' bond rating is holding steady at Aa1, the second highest rating, according to a credit opinion released this week by Moody's Investors Service.

The outlook is 'stable” due to the city's sound financial and elevated but manageable debt, according to the rating agency. The risk of owning the DoubleTree Hotel, elevated debt, and exposure to unfunded pensions are the greatest liabilities, according to Moody's.

'The Aa1 rating is indicative of the city's large and growing tax base; its role as a regional economic center; healthy reserve levels with ample revenue raising flexibility; elevated debt profile; enterprise risk associated with the city-owned hotel and convention center; and moderate exposure to unfunded pension liabilities,” the agency reported.

Kris Gulick, a city council member and chairman of the city's finance committee, praised the rating, although he said the goal is to regain the top rating.

'It confirms we still have a good strong financial position, good strong management of the budget and the city,” Gulick said.

Gulick said the city will eventually need to decide whether to sell the DoubleTree, but at this point it is premature. The hotel has about $45 million in debt.

The rating of general obligation bonds is based on Cedar Rapids' financial position, assets and risk.

The rating will be used for Cedar Rapids' two upcoming bond sales on May 13. One sale is for $39.6 million of general obligation bonds, including $29.1 million to refinance old bonds at a lower interest rate and $10.5 million for capital projects. The other is $1.6 million in taxable general obligation bonds to pay for maintenance and improvement projects at Veterans Memorial Stadium and the Cedar Rapids Ice Arena, which are not eligible to be included in the standard bands.

The city's bond rating influences the interest rate Cedar Rapids pays when repaying those bonds. The lower the rating, the higher the interest.

After the sale of the bonds, Cedar Rapids will have $295.1 million in outstanding general bond debt, which is about 3.5 percent of the total valuation of the city. About $45 million of the outstanding debt is from a period when the city used general obligation bonds to pay for what's referred to as enterprise funds, such as water and sewer, which generate revenue from user fees.

Cedar Rapids changed the practice and now uses revenue bonds for those needs.

On Thursday, Moody's assigned Aa2 ratings for $14.1 million in water revenue bonds and $5.1 million in sewer revenue bonds scheduled for sale on May 16. The proceeds will be used for upgrades to the city's water and sewer systems. The city has $58.2 million in sewer revenue debt and $86.3 million in water revenue debt.