By Shereen Siewert
WAUSAU — Moody’s Investor Service has downgraded Wausau’s credit rating amid concerns over the city’s continued high debt load and plans for additional borrowing.
The downgrade was announced by Moody’s last week.
The announcement cited increases to the city’s debt, declines in tax base, deteriorating demographics, narrowed reserves or growth in the city’s outstanding general fund advances as factors that led to the downgrade.
In June, Moody’s assigned Wausau a credit rating of Aa2, equivalent to a Standard & Poor AA rating. That rating matched many Wisconsin cities including Oak Creek, La Crosse and Green Bay.
The service on Nov. 10 downgraded Wausau’s general obligation debt rating to Aa3. Concurrently, Moody’s assigned an Aa3 rating to the city’s $6.6 million Taxable Note Anticipation Notes, Series 2017E, and to $11.9 million in water and sewer bonds.
The purpose of Moody’s ratings is to provide investors with a simple system of gradation by which future relative creditworthiness of securities may be gauged.
“The downgrade to Aa3 reflects the continuation of advances to deficit tax increment district (TID) funds and an elevated debt burden which is expected to remain high given the current issuance and plans for future debt issuances in 2018,” the notice states. “The rating also reflects the city’s moderately-sized tax base, below average resident income indices, sound financial operations, and manageable unfunded pension liabilities.”
The city’s rating could be downgraded further if there are larger than anticipated increases in the city’s debt burden, declines in tax base, deterioration of the city’s demographic profile, and a narrowing of the city’s reserves.
Conversely, the city could see a boost through moderation of the city’s debt burden, repayment of outstanding general fund advances, and material expansion of the tax base, according to Moody’s.
On Tuesday, city leaders finalized plans to restructure $18.5 million in debt to improve the city’s borrowing capacity for future projects. That restructuring was accounted for in Moody’s report.
This story will be updated.