Moody's downgrades St. Louis' credit rating
A major credit rating agency has released a report downgrading St. Louis' ratings.
In a report that was released last Friday, Moody’s Investors Services downgraded by one notch the city’s $27.4 million worth of general obligation bonds. It also dropped the rating on the St. Louis Municipal Finance Corporation's, $123.5 million of “outstanding rated lease revenue debt issued for essential purposes,” as well as the corporation's $138.6 million “of outstanding rated lease revenue debt issued for non-essential purposes.”
Moody’s decision could make it more expensive for the city to borrow money.
The report attributed the downgrade to “the city's weak socioeconomic profile; reliance on earnings taxes which are due for voter reauthorization in 2016; a relatively narrow financial position; and a high debt burden.
“These credit challenges are balanced against several attributes, including a tax base that remains sizeable despite recent declines; relatively stable financial performance; recent declines in pension costs due to reforms; and a diverse economy that continues to serve as a regional hub for health care, higher education, and finance,” the report stated.
The report went onto say that the city’s stable outlook reflects “recent adjustments management has made in staffing levels as well as other expenditure reductions, actions which we expect will ensure structurally balanced financial operations.
“The outlook also reflects an expected modest fiscal 2015 year-end surplus in the General Fund and projected balanced operations for fiscal 2016,” the report states. “We believe that these factors point to stability in both the city's finances and credit profile.”
St. Louis Comptroller Darlene Green said in a statement that the lowered bond rating “is due in part to the rating agency’s revised rating methodology.
“In addition, the city’s high debt profile, low liquidity and reserve levels, and socioeconomic indices are factors as well,” Green said. “The city continues to manage these financial management practices such as conservative budgeting. The city has taken steps to increase revenues and decrease expenditures in order to strengthen its profile and increase reserves.”
St. Louis residents will vote on whether to reauthorize the 1 percent earnings tax next year, which is paid by people who either live or work in the city. Green noted that the last reauthorization vote in 2011 passed overwhelmingly.
“The city has a large and diverse tax base that has stabilized over the years,” Green said. “The private sector continues to provide a trend of strong economic development in the city with several large developments underway.”