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Moody’s assigns city of DeKalb same A1 rating with negative outlook

September 28, 2018

DeKALB – Moody’s Investors Service affirmed the city of DeKalb’s general obligation unlimited tax rating of A1 on Tuesday.

Even though the city is maintaining its upper-medium grade bond rating with low credit risk, Moody’s gave the rating a negative outlook in its recent review.

That mostly is based on a “high and growing pension burden” and “rising budgetary pressures” starting to affect city reserves, according to the report.

Moody’s cited two factors in its report that could contribute to an improved bond rating – a “material reduction in the city’s leverage related to long-term debt and pension liabilities,” and “expansion and diversification of the tax base,” the report said.

The investors service also said a few factors could lead to a future rating downgrade, including deteriorating resident income levels or “tax base valuation, declines in the city’s reserves or liquidity, and increased leverage to the city’s debt or pension burden,” according to the report.

Interim City Manager Molly Talkington said she is glad the city still has the same rating.

With recent budget talks and plans to achieve better pension funding, she said, she is hopeful that the city will not have a negative outlook for the next Moody’s report after better balancing of city finances.

“As long as we do that, that’s another positive outlook that will help us get out of that negative status,” Talkington said.

The city faces a projected shortfall of more than $450,000 in fiscal 2018. If nothing is changed, that would grow to a $1.2 million shortfall in the fiscal 2019 budget, according to city documents.

The city of DeKalb has been looking at options to balance its fiscal 2019 budget and get more money into reserves, including expense reductions and new revenue streams effective June 1, 2019.

Substantial cuts to the police and fire departments that would involve downsizing administrative personnel are among the considered reductions to plug a projected budget shortfall and to keep the deficit from worsening.

If all the adjustments to the fire department are included, the city will save $250,000 a year.

The measures include the elimination of the deputy chief of operations, who makes more than $175,000, and a firefighter, who makes about $100,000.

If approved in full, cuts to the police force would save about $100,000.

Proposed moves include eliminating two officers who are not working the streets in order to save more than $175,000, as well as eliminating a police commander through attrition and adding an officer.

Although the police and fire departments would see the largest reductions, Talkington said, the city also could see a $300,000 reduction in staff reorganization, including eliminating the human resources and information technology director positions, as well as possible wage reductions for the assistant city manager.

She said city manager wages also could be reduced, but that remains to be seen.

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