Standard & Poor's Ratings Services said it raised its underlying rating on Iola, Kan.'s series 2011 general obligation bonds one notch to BBB-plus from BBB.
The outlook is stable.
The upgrade reflects Standard & Poor's assessment of the city's formal adoption of its goal to maintain reserves between 5% and 15% of general fund expenditures and the estimated general fund unencumbered cash balance increase in fiscal 2012.
"We believe Iola's enterprise funds will likely continue to support general fund operations," said Standard & Poor's credit analyst Jim Tchou. "While we do not expect to change the rating within the outlook's two-year period, we could lower the rating if utility operations were no longer able to provide support to the general fund. Conversely, we could raise the rating further if Iola were to continue to improve and sustain the general fund's position at the targeted reserve level."
The rating reflects Standard & Poor's opinion of the city's: somewhat limited economy, reflected by a moderately concentrated property tax base, coupled with adequate wealth and income; ongoing reliance on the enterprise funds to support general fund operations and liquidity needs; and moderate overall debt with above-average debt amortization.
The city's full-faith-and-credit and unlimited ad valorem property tax pledges secure the bonds.
