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Cedar Rapids Receives Aa1 Bond Rating on General Obligation Debt

Cedar Rapids Receives Aa1 Bond Rating on General Obligation Debt

May 22, 2020

Cedar Rapids Receives Aa1 Bond Rating on General Obligation Debt and Aa2 Bond Rating on Revenue Debt

The City of Cedar Rapids is pleased to announce that Moody’s Investors Service has assigned a Aa1 rating to the City’s $84 million General Obligation Bonds, Series 2020A, $28 million Taxable General Obligation Bonds, Series 2020B and $27 million Taxable General Obligation Bonds, Series 2020E.  The Aa1 rating indicates the bonds are judged to be of high quality and are subject to low credit risk.  The outlook on the general obligation rating is stable, reflecting Moody’s expectation that the City’s healthy financial profile will be maintained and its long-term leverage will remain manageable.  Concurrently, Moody’s has affirmed the Aa1 rating on the City’s outstanding general obligation unlimited tax debt.

Moody’s conducts a rigorous analysis of the finances and general management of the operations for cities across the United States. These ratings are used as a measure of confidence in the city governance upon each issuance of bonds. In addition to finances and general management, Moody’s takes into account the overall economic health of the city, including major employers, local residential, commercial and industrial construction, unemployment and other economic indices. According to Moody’s, issuers or issues rated Aa1 demonstrate very strong creditworthiness relative to other US municipal or tax-exempt issuers or issues.

The Aa1 rating incorporates the City’s large tax base and its role as an employment hub for eastern Iowa.  The rating also reflects the City’s strong fund balance and liquidity, supported by prudent management and ample revenue raising flexibility. The stable outlook on the GO rating reflects Moody’s expectation that the City’s healthy financial position will be maintained and its long-term debt and pension obligations, while above average, will remain manageable.

“The City of Cedar Rapids maintains a strong financial profile through its financial management practices and this rating from Moody’s confirms the City’s creditworthiness. The City will continue to monitor how the coronavirus outbreak will impact City finances and will make financial adjustment as necessary to maintain a strong financial profile.” said Casey Drew, Director of Finance for the City of Cedar Rapids.

Moody’s also assigned Aa2 ratings to the City’s $6 million Sewer Revenue Bonds, Series 2020C and $9 million Water Revenue Bonds, Series 2020D.  Concurrently, Moody’s has maintained the Aa2 rating on the City’s previously issued water and sewer revenue debt.  Repayment of these bonds is secured by the City's sewer utility and water utility systems. 

The Aa2 sewer and water revenue ratings incorporate the systems’ large service area and sound debt service coverage. The rating also reflects the systems’ healthy liquidity supported by unlimited rate setting authority, and moderate debt burden.

Moody’s regards the coronavirus outbreak as a social risk, given the implications for public health and safety, and it is not a key driver for this rating action.    The City is not susceptible to immediate material credit risk related to coronavirus.

To view the full report, visit www.moodys.com/researchandratings.

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