CORALVILLE Coralville’s attempt at a financial makeover, which included the hiring of a consultant, failed to make a good first impression on an influential financial agency.
The city, however, may have reason to hope that changes in the future.
Moody’s Investors Service on Tuesday reaffirmed the same low scores it gave the city last year on its bond ratings. The credit rating agency also said the outlook on Coralville’s bond ratings remained negative.
The status-quo result follows the city’s hiring of Springsted Inc. a year ago to help it improve its sinking bond rating, which is viewed and a key indicator of financial health.
The St. Paul, Minn.-based firm in January gave the city a report recommending certain strategies and policies.
Mayor John Lundell said Wednesday the city has implemented some of those and is working on others but needs time for that to be reflected in the bond ratings.
He also said hiring Springsted, which was paid $16,210, was worthwhile.
It’s a glass half full: I appreciate it didn’t decline, Lundell said of the bond rating. The glass half empty: I certainly wish that it strengthened our rating in some way.
In its report. Moody’s noted that Coralville is in the early stages of reducing its debt, divesting itself of non-essential property and institutionalizing fiscal and debt management policies.
Going forward, advancement in these efforts have the potential to positively impact the city’s credit quality, Moody’s reported.
For now, however, Moody’s continues to take issue with Coralville’s level of debt, its use of tax increment financing and its ownership in what the agency considers non-essential government purposes specifically a hotel, golf course, performing arts center and brewery.
The negative outlook on all ratings reflects our expectation that the city will continue to have an outsized debt burden and significant exposure to enterprise risk relative to its tax base size and available liquidity, Moody’s analysts reported.
Moody’s kept Coralville’s general obligation bond rating at Baa2 and its outstanding annual appropriation debt at a lower Ba1 rating.
Coralville’s main bond rating, which is akin to a credit score, dropped six notches between April 2012 and last summer, when it also was given a negative outlook.
Moody’s top rating is Aaa, which is eight spots higher than Baa2 and something only a couple of Iowa communities currently have. One of those is Iowa City.
In January, Springsted’s Barry Fick warned the Coralville City Council it would take time to see changes. He said the initial goal should be to have the negative outlook designation changed in a year, and then the bond rating.
City Administrator Kelly Hayworth said Wednesday that the city is on that track. He was pleased that the city’s bond rating did not go down and that Moody’s listed as strengths its efforts to reduce its debt, its financial policies, a stable area economy and continued growth in its tax base.
From my viewpoint, it continues to move forward, he said.
Fick said Moody’s downgrades were more a result of its perception of Coralville as a small town than of the city’s business practices. He said despite its 19,000 residents, Coralville is more of a regional center with its retail offerings and the nearby presence of the University of Iowa Hospitals and Clinics.