Moody’s Investors Service has downgraded Rockford’s general obligation rating to Aa3 from Aa2 ahead of its sale of $3.4 million of unlimited-tax alternative revenue source GOs.
The move affects $147 million of debt, including the upcoming GO sale. Proceeds will finance improvements to the city’s water utility. Debt service will be paid with net revenue of the water utility although the bonds carry Rockford’s full faith and credit pledge.
“The rating downgrade reflects the deficit cash balance in the city’s general fund, continued weakening of several tax increment and internal services funds, and numerous budgetary pressures, including sales tax revenue shortfalls and mandated expenditures associated with public safety operations and pensions,” analysts wrote.
Moody’s said the rating also incorporates Rockford’s somewhat limited financial flexibility because of its non-home rule status, a manufacturing-based economy that continues to exhibit high unemployment levels despite recent stabilization, and an elevated debt burden with some exposure to variable-rate debt.
