DeKALB – The city of DeKalb’s bond rating was upgraded by Moody’s Investors Service, which removed its negative outlook.
As the city borrows $9 million to pay for the new police station and the expansion of the DeKalb Public Library, it does so with an Aa2 rating.
“This is definitely a step in the right direction,” said Assistant City Manager Rudy Espiritu. “Moody’s looked at what the city has been doing in the past few years.
Moody’s researches commercial and governmental agencies and rates them on 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.”
A numeral of 1, 2 or 3 is added to signify where the entity falls within that rating.
The removal of the negative outlook has no official effect on the city’s ability to borrow, but Espiritu said it might have positive, but indirect effects.
“There’s no quantitative data that it will, but it potentially could ... It could primarily bring in more bidders for those bonds, and thereby bring in more competition for the bonds,” Espiritu said.
More competition could lead to better borrowing rates for the city.
The investors service notes that with this latest bond sale, the city will have $40.9 million in outstanding general obligation debt, which Moody’s considers a manageable debt burden.
Moody’s highlighted two fiscal strengths of DeKalb: the presence of Northern Illinois University, and the reduction in city employees in response to budget pressures.
The analysis states the rating could improve if the city increases its reserves and expands its tax base. Espiritu said the city has been working to bolster its reserves so they are 25 percent of the city’s annual expenditures.
But the rating could be downgraded if the city goes into deficit spending in the upcoming fiscal year. Espiritu said the city has shown in the past it can meet its own fiscal projections.