Citing Bettendorf's high debt burden, Moody's Investor Service Thursday (3/27) downgraded the city's bond rating from Aa1 to Aa2. The lower rating is expected to result in higher interest on the more than $20 million in general obligation bonds slated to be issued next month.
The agency in its rating rationale said the city was in a "sound financial position supported by prudent fiscal management and flexibility to adjust tax levels," but added the lower rating "reflects challenges tied to the city's elevated debt burden, high fixed cost ratio and moderate exposure to two underfunded cost-sharing retirement systems."
Moody's also said the city could move its rating back up with "moderation of the city's high direct debt burden," which will reach $133 million after completion of this spring's general obligation bond issuance. The city's debt will reach 86 percent of the maximum debt allowed by the state after the new bonds are issued.
City Manager Decker Ploehn and City Finance Director Carol Barnes have defended the city's high debt level and in a press release on the Moody's downgrade Ploehn said "we don't anticipate it (downgrade) to have a significant impact on the interest rate that the city will receive.
"I'm confident that the mayor and city council will continue to stay the course with strong fiscal planning and conservative spending, while strategizing to see how we can gain back the Aa1 rating," he said in the news release.
Bettendorf was one of nine cities in Iowa to have their bond ratings reviewed by Moody's this spring. Ames, Davenport and Sioux City all have been downgraded a notch, Mason City has maintained its current rating, while the rating for Cedar Rapids, Clive, Des Moines and Dubuque have yet to be released.
CLICK HERE to view the Moody's rating action to downgrade Bettendorf's bonds.
CLICK HERE to view the city's news release on the bond rating downgrade.
