The City of Redwood Falls got good news earlier this week when it received word from Moody’s Investor Service that its general obligation unlimited tax rating was upgraded from A3 to A1.
Melissa Meyer, director of finance and administrative services for the City of Redwood Falls, talked about the upgrade with the city council at its March 5 meeting.
Meyer said when an entity like the City of Redwood Falls wants to issue debt it seeks out a rating that is used to determine its level of risk, and following that rating companies like Moody’s perform what is known as an annual surveillance to determine if a rating should be up-graded or downgraded.
That decision is based on changes that occur.
“In October 2017 the city’s rating was downgraded from A2 to A3,” said Meyer, adding the main reason given was that the rating company determined that the city’s potential to issue future debt for the hospital expansion was a significant risk.
Another surveillance was conducted recently, and Meyer said one of the reasons for the upgrade had to do with the hospital.
According to Moody’s credit opinion published March 4, 2019, “the City of Redwood Falls benefits from reduced enterprise risk following the recent transfer of the city-owned hospital to a private provider.”
In addition, the upgrade was made by Moody’s based on strong reserves bolstered by substantial alternate liquidity in its capital projects fund and a modest debt burden. Meyer said Moody’s was very interested in how the city will approach its future financially as it moves beyond the 10-year financial commitment it has from Carris Health.
That, she added, is something the city council will have to start discussing soon. Keith Muetzel, city administrator, added an A1 rating is not the highest credit rating an entity can receive, but he added for the City of Redwood Falls it likely is the highest credit rating it will be able to see.
That, he explained, is simply due to the fact that it is a smaller community with a small tax base from which to draw. Meyer said this is very good news for the community, agreeing with Muetzel that the fact that the community has a small population always adds some risk.
She said if even one of the larger employers in the community would leave that could have a significant impact on the population leading to a determination of a higher credit risk. Income levels, as well as the age of the city’s residents, also play into the rating.
In other action during its meeting, the Redwood Falls city council:
• Declared several items belonging to the Redwood Falls Police Department as surplus property, including a Colt AR-15 rifle, which it intends to auction off, three filing cabinets and a shredder. Due to the condition of the filing cabinets and the shredder, as well as the lack of interest in those items from other city departments, the plan is to have those items destroyed.