With the municipal elections coming up in November, many of the races are focusing on financial issues and whether or not those in charge are doing a good job. There are just four cities that have what’s called a “Triple-A” bond rating — the best rating a city can get.
Ames is one of the cities with the Triple-A rating and City Manager, Steve Schainker says it’s important as they borrow millions of dollars each year for projects. “The better your credit rating, the better your interest rate,” Schainker. Ames and other cities borrow money through general obligation bonds for things such as parks, swimming pools and economic development projects.
A good bond rating means there’s less interest to pay, which comes out of the pockets of taxpayers. “We pay for those bonds through our property taxes each year and we save hundreds of thousands of dollars — hundreds of thousands of dollars to our taxpayers each year — because of this Triple-A credit rating,” Schainker says. West Des Moines, Iowa City and Cedar Rapids are the other three cities in Iowa with the top rating.
Jeff Pomerantz was city manager in West Des Moines and now he’s in Cedar Rapids which has Triple-A financial ratings for the 38-consecutive years. “What it means is that the city has operated its finances to the very, very highest standard possible, and that we have been acknowledged by an independent evaluator –Moody’s Investment Service– as properly and effectively managing the finances of the city,” according to Pomerantz.
Pomerantz says the rating is more than a plaque on the wall for Cedar Rapids, it’s money in the pocket. “We just did some analysis that said that over a twenty-year period that even a fraction a very small fraction of a percent — say a tenth-of-a-percent — could make a difference,” Pomerantz says. “Say if you’re borrowing twenty-million dollars of a hundred-thousand dollars a year or so. So over time, there’s real savings to the taxpayer and that’s why it’s most important and why it’s critical.”
Thirty-miles down Interstate 380 in Coralville Moody’s rating isn’t pleasing City Manager Kelly Hayworth. “We were recently downgraded by Moody’s, and it’s a B rating, and that’s obviously a lot lower than we would like to see,” Hayworth says. Moody’s says Coralville, which is recovering from flooding and aggressively investing in developing a commercial area called River Landing, has been borrowing a lot of money and in Moody’s analysis is over-leveraging its tax base. City Manager Hayworth says the city is using a Minneapolis consulting firm to project a better image to Moody’s.
There are three firms that rate cities. Larry Burger, is a vice president for the Speer Financial firm which arranges bond sales for cities. Burger says Moody’s looks at several issues to set a city’s rating, and may also modify an existing rating. For example, Ames has a substantial federal payroll in the community and is vulnerable to what happens in Washington. “What Moodys will do is they’ll shoot a warning shot across the bow. If they’re seeing some negative things going — if they see some things happening in your community — they may say, ‘you’re still an A-one with a negative outlook,” Burger explains. Or if things are starting to improve, they may give the city a positive outlook along with the rating.
Burger used to be on the other side of the bond issues as the finance director for the City of Waterloo.