Bettendorf's bond consel has raised the possibility of a downgrade in the city's bond rating by Moody's Investor Service, a move that would mean higher interest rates on $20.17 million in general obligation bonds slated for approval by aldermen at Tuesday's (3/4) city council meeting.
"in January of this year, Moody's Investor Service released its new methodology on U.S. Government General Obligation Debt," Springsted, Inc., Bettendorf's long-standing advisor on bond issues, stated in its list of "risks and special considerations" prepared for the city. "Along with this release, Moody's provided a list of local government general obligation rates that they currently have under review for upgrade or downgrade. The City of Bettendorf was on the list as a potential downgrade."
Moody's assigned an Aa1 rating to the city's $14.4 million general obligation bonds issued last spring.
"If such a downgrade does transpire, this could result in higher interest rates than what we have currently projected in the attached bond schedules," Springsted wrote in the letter to the city. "Higher interest rates will impact the projected savings on the refunding transaction and potentially require adjustments to the principal amounts of the new money financing to meet the city's levy constraints."
Proceeds from the bonds are to pay for a long list of street improvements/upgrades, a new HazMat fire truck, improvements at the new Forest Grove Park and property acquisition/demolition and streetscaping along Grant and State Streets downtown.
The general obligation bond repayment schedule provided by Springsted shows a "True Interest Cost" on the new general obligation bonds of approximately 3.273 percent.
The debt service schedule shows the city would pay $7.45 million in interest over the 20-year life of the $18.77 bond issue, and approximately $520,000 in interest over the 20-year life of the $1.4 million general obligation bond issue.
The city's 2014-15 budget, also slated for approval at the meeting Tuesday, allocates $5 per assessed valuation of property tax to paying principal and interest on the current debt. With the new general obligation bonds to be issued, the city debt would reach $133 million, or nearly 86 percent of the maximum allowed by the state.
CLICK HERE to download the Springsted report and bond repayment schedules.
