Moody's Assigns and Affirms Aa1 to Marion's GO Bonds
Moody’s Investors Service assigns a Aa1 to the City of Marion, IA’s $5.4 million General Obligation Bonds, Series 2019A and $10.1 million General Obligation Urban Renewal Refunding Bonds, Series 2019C. At the same time, Moody’s has assigned a Aa3 rating to the city’s $3.4 million General Obligation Annual Appropriation Bonds, Series 2019B. Concurrently, Moody’s has affirmed the Aa1 rating on the city’s previously issued general obligation unlimited tax (GOULT) bonds and 2013A and 2013B Urban Renewal General Obligation Certificates of Participation. Post-issuance, the city will have $63.8 million in net direct debt.
The Aa1 GOULT rating reflects the city’s healthy financial profile with strong reserves along with a continuing growing tax base near Cedar Rapids (Aa1 stable) with above average resident income indices. The rating is offset by an above average debt burden and moderate pension liabilities.
The 2013A and 2013B Urban Renewal General Obligation Certificates of participation are also rated Aa1 given a lack of appropriation risk to make lease payments that are ultimately secured by the city’s general obligation pledge.
The Aa3 rating is notched twice off the city’s Aa1 GOULT rating reflecting the risk of non-appropriation and the less essential nature of the financed project.
Outlooks are generally not assigned to local governments with this amount of debt.
FACTORS THAT COULD LEAD TO AN UPGRADE
- Moderation of the city’s debt burden
- Continued expansion of the tax base
FACTORS THAT COULD LEAD TO A DOWNGRADE
- Weakening of reserves
- Growth in the city’s debt or pension burden
- Contraction of the tax base
The city’s GOULT debt, including the Series 2019A and 2019C bonds, is secured by secured by the city's general obligation pledge and all taxable property, which is subject to the levy of a property tax levy, unlimited as to rate and amount.
The 2019B bonds are also secured by the city’s GOULT pledge, but are subject to annual appropriation. Once debt service on the bonds have been appropriated for a given year, the bonds are general obligations of the city and the city can levy for debt service in an amount unlimited as to rate or amount. If the city does not appropriate funds for debt service, the city’s obligation to repay the bonds terminates. While the bonds are ultimately secured by the city’s GOULT pledge, it intends to pay debt service with TIF revenues.
The city’s 2013A and 2013B Certificates of Participation are secured by lease rental payments and are ultimately secured by the city’s GOULT pledge.
USE OF PROCEEDS
The Series 2019A Bonds will finance various capital improvements across the city. The Series 2019B Bonds will finance airport runway improvements. The Series 2019C Bonds will refund the city’s existing 2013A Certificates of Participation.
The City of Marion is located adjacent to Cedar Rapids in Linn County (Aaa stable). The city encompasses 16 square miles with an estimated population of approximately 38,000 residents.