Moody’s Investor Service has continued Madison’s Aaa bond rating with a negative outlook. The rating is for the $110.2 million in tax-exempt general obligation bonds and notes that will be issued by the City next week. This is the highest possible rating an issuer can receive. It affirms the city’s sound financial and budget management, conservative debt repayment structure, stable economy relative to the state and nation, and solid general fund reserves. A negative outlook was affixed to all of the city’s debt in 2018 due to the draw down of cash balances at the Water Utility as a result of higher maintenance costs and the timing of the utility’s most recent rate approval by the Wisconsin Public Service Commission (PSC).
“It is very gratifying that Madison continues to receive a Aaa Bond Rating which reflects our city’s long-term stability and favorable business climate,” said Mayor Satya Rhodes-Conway. “I am committed to continued cooperation between my office, city staff and the Common Council to ensure we make the tough decisions necessary to deliver the results our residents expect while exercising prudent fiscal management.”
Moody’s cited a stable and diverse economy, sound financial operations and a history of healthy reserves as well as manageable debt and pension burdens among the city’s strengths. Analysts noted however that challenges include strict levy limits that reduce the city’s revenue raising flexibility for operations. The service also noted that sound financial operations benefit from strong budgetary control and stable reserve levels. They report that the city’s sound financial profile is expected to continue due to the presence of healthy reserves, including the Water Utility’s repayment of the cash advance from the city’s General Fund in December 2018.
The rating confirms market confidence in the city’s economic condition and the Mayor and Council’s fiscal management. Moody’s identified three conditions that could change the rating down in the future – significant increases in fixed costs, including debt service, weakening of the city’s tax base and resident income levels, and material declines in operating reserves and liquidity, including the financial condition of the Water Utility.