E-MAIL TO THE EDITOR: City Sheds Light Into Its Credit Downgrade

Last week, Patch first reported that the City of University Place's credit rating had been downgraded by .

The city posted this message on its website that gave more insight into its downgrade:

Moody’s has reviewed the City of University Place’s bond rating on the City’s outstanding general obligation debt and lowered the City’s "A1" rating to “A2”.

According to Moody’s, the downgrade primarily reflects the City’s overall amount of General Fund supported debt, mostly accumulated in conjunction with development of the City’s Town Center project. Moody’s also issued a negative outlook due to the City’s relatively low General Fund cash balance, which Moody’s believes will remain constrained. The lower General Fund balance primarily resulted from the City’s repayment of a $1 million loan in 2011.

Moody’s noted that the City has made substantial efforts to mitigate its very limited budgetary flexibility, specifically the City’s large cut to staffing levels in 2009. Through this reduction, “along with other programmatic cuts, the city has shed roughly $4 million dollars in O&M expenditures.” While Moody’s commented positively on the City’s financial management, Moody’s believes that the City has inflexibility in its budget over the long-term given the City’s overall debt levels, low staffing levels and limited ability to raise additional revenue.

Moody’s rating follows closely on the heels of Standard &Poor’s recent decision to maintain the City’s credit rating at “A+” with a stable outlook. It is not uncommon for rating agencies to reach slightly different rating conclusions based on the same underlying facts. Moody’s action does not affect City operations of services. The City’s adopted biennial budget and future financial planning calls for no new debt, building the City’s cash balances and maintaining financial liquidity in the future.

Today, The News Tribune ran a story about the downgrade. Click here to check it out.