DeKALB – DeKalb aldermen were pleased to hear that the city’s bond rating held steady at a time when other governments are seeing theirs drop.
“I think that’s a huge achievement, especially considering this environment we’re in, especially for municipalities,” Fourth Ward Alderman Brendon Gallagher said.
The city retained its Aa2 rating, albeit with a negative outlook, from Moody’s Investors Service. Assistant City Manager Rudy Espiritu and Mayor Kris Povlsen said they were hoping for an upgrade.
“Moody’s did acknowledge the massive reductions we’ve made in our general fund to help build up that fund balance,” Espiritu said to the City Council on Monday. “I think Moody’s in this was very conservative. I think in this economy, they’re cautious in giving any kind of upgrade.”
Moody’s researches a multitude of commercial and governmental agencies and gives them a rating to reflect how reliable they are to borrow from. An Aa rating is the second-highest rating Moody’s gives out, meaning they are “judged to be of high quality and are subject to very low credit risk.”
Espiritu said that DeKalb’s fund balance, which is approaching $4 million, is too low when compared to other municipalities that have the same bond rating from Moody’s.
Espiritu said their outlook could be upgraded if an upcoming audit shows that the city has had two years of fund balance growth. City officials expect the audit results in December.
In an interview, Povlsen said he hoped the city’s negative outlook designation would improve before it borrows $2.4 million in May to pay for the construction of a new police station. In September, the City Council approved a plan to borrow no more than $12.7 million to pay for the project.
If the city’s bond rating is upgraded, it would have a small but positive impact on the interest rate in May, Espiritu said.
“It will get a little better interest rate, but it would be a minimal change in the actual interest rate,” he said.
The plan calls for the city to borrow money in two installments to reduce interest costs. The city will borrow $9.6 million this month.
Second Ward Alderman Tom Teresinski asked where DeKalb ranked with the rest of the nation in terms of its bond rating. Espiritu said that, according to Moody’s, only 46 percent of the country has a bond rating of Aa2 or higher.