By Shereen Siewert
Wausau’s credit rating remains downgraded two years after first taking a hit, with more borrowing on the horizon for the city’s planned sewer and water upgrades.
The current credit rating, Aa3, still represents low risk, according to Moody’s Investor Service, but is one step lower than the city’s previous Aa2, equivalent to a Standard & Poor AA rating. The earlier rating matched many Wisconsin cities including Oak Creek, La Crosse and Green Bay.
During his campaign kickoff speech Sept. 9, Mayor Robert Mielke said the city would soon be sharing good news from Moody’s. The report, issued Sept. 6, cites strong city reserves and liquidity despite using funds in previous years to support tax increment district (TID) development.
“The good news is that the Moody’s report noted the city’s strong and growing current account surplus, our aggressive pay-off of outstanding debt and the significant assessment growth from the ongoing investment in new projects and new infrastructure that this debt was needed to be taken out for,” Mielke said, pointing specifically to the business campus expansion and riverfront projects.
The city’s primary challenges remain a subdued socioeconomic profile, and extensive TID activity that could pose operational pressure on the city’s finances if their associated assessed valuations depreciated, the report states.
According to Moody’s, repayment of TIDs to the general fund, along with sustained growth in reserves and material growth among residents could lead to an upgrade. Increases in debt could lead to a downgrade, the report states.
The report is based on total direct debt of $85.3 million. But that amount is expected to rise sharply, as proposed $101 million upgrades to Wausau’s drinking and wastewater treatment facilities will likely push the city’s debt to to more than $208 million, a jump of more than 300 percent since 2014, according to city figures.
Wausau aims to borrow funds in 2020 for the projects, which will allow the current facilities to meet new, stricter phosphorous and capacity requirements while improving safety, reliability and performance.
“As we’ve noted before, all of this debt is an investment in previously delayed or long-needed infrastructure and our current rating was reaffirmed, even with our increased borrowing and large projects like the water and sewage utilities….along the way, we have re-structured our debt to take advantage of low interest rates and our borrowing capacity is well underneath the mandated 50 percent threshold for municipalities,” Mielke said.
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.