MASON CITY — The City Council in Mason City last night approved the sale of $16.15 million worth of taxable general obligation urban renewal bonds for the River City Renaissance Project as well as $5.1 million worth of general obligation refunding bonds for refunding existing debt for the Public Library renovation project. The council learned though that Moody’s Investors Service has slightly downgraded the city’s bond rating from a “AA2” to a “AA3”.
City Finance Director Kevin Jacobson shared the Moody’s report with the council at last night’s meeting. “The major concern that Moody’s had is the amount of debt that the city has, and it’s based on these two issues and the issues we’ll have coming up in the near future. It will be the $9 million additional for the River City Renaissance and the $10 million issue for the capital improvements that I’ll be bringing up later in the year.”
Jacobson says Moody’s does recognize that the city has a healthy reserve to bolster its credit strengths. “That’s one of the things that I strive to maintain, and I know city council does, and they listen when we go through that. That’s one of the things I believe we need to continue in the future because we are issuing this debt. They also talked a little about the growth of the tax base, and that has been growing a little bit here in the last few years, so that’s one of the things we want to kind of concentrate on as well is to continue that growth.”
Jacobson says there were fewer bidders with these bond issues likely due to the downgrade. “Our issue last year we had nine bidders. This year, we have five bidders for the $16.15 million and four bidders for the $5.1 million. I believe that can be attributed to the fact that we had the downgrade, so that’s one of the things that would be a negative. However that being said, I think you’re going to find out that the rates are relatively competitive as well.”
According to Moody’s long-term rating definitions, cities with a “AAA” rating are judged to be of the highest quality with minimal risk. Ratings of “AA1”, “AA2” or “AA3” are judged to be high quality and are subject to very low credit risk. “B” ratings are those that are considered to be medium-to-high credit risks, while “C” ratings are those to be in poor standing and a very high credit risk.