Standard & Poor’s downgraded Bloomington’s rating one notch to AA-minus and warned of further action by assigning a negative outlook. Analysts cited he city’s ongoing financial deterioration caused by a its inability to close a budget gap.
The strains are primarily due to having to dip into general funds to help support a sports coliseum, and to increasing expenditures that have outpaced revenue. This led to a negative unreserved general fund balance in 2008.
The review was conducted in conjunction with Bloomington’s upcoming sale of $2.8 million of general obligation bonds. Proceeds will restructure debt sold in 1996 and 2001, pushing out the maturity to improve near-term general fund liquidity.
“The negative outlook reflects our view that the city’s financial integrity continues to be fundamentally challenged. We believe the city’s operating trend, which has substantially depleted available reserves from very strong levels, reflects a persistent inability to make budgetary adjustments of sufficient magnitude to keep expenditures from outpacing revenues,” wrote analyst Caroline West.
Bloomington, located in central Illinois, has raised taxes and fees and cut staff levels and spending to help improve its balance sheet.
Its strengths include a deep and diverse employment base, diverse revenue streams given the city’s home-rule status, and moderate overall debt levels.