Moody’s Investors Service last week affirmed the top credit marks held by Cedar Rapids on its $255 million of outstanding general obligation debt as the city seeks to recover from devastating floods that hit last June.
“Moody’s highest quality Aaa rating is based on the city’s stable economy located in eastern Iowa that is expected to withstand near-term devaluation challenges; history of stable financial operations with satisfactory fund balance policies; and average debt burden with future borrowing anticipated,” analysts wrote.
Cedar Rapids is the center for commerce, industry, and transportation for an eight-county area. The tax base, currently valued at $8.2 billion, has grown an average of 4.7% over the last five years.
Officials have estimated damages of more than $400 million from the floods that left chunks of the city underwater as the Cedar River flooded. Although the city faces challenges in managing through the devaluation of a chunk of its tax base, Moody’s said it expects it to weather the near-term challenges.
Officials currently expect a January reassessment to show a 3% drop in valuation. Any devaluation in the tax base is expected to impact the 2010-11 fiscal year. Other commercial and residential appreciation will help offset the loss.
“Favorably, the city’s top 10 largest employers have either not been impacted by the floods or are all are back in full operations to date,” and several have committed to remaining in the city and expanding, analysts wrote.
The city is working with Iowa and the Federal Emergency Management Agency on reimbursement issues. The state has obligated $167 million in federal and state funds.
Cedar Rapids’ finances otherwise remain sound due to its conservative budgeting practices. It closed out fiscal 2007 with a general fund balance of $32.7 million, which represented 36.7 % of general fund revenues. It drew down its reserves in fiscal 2008 by $9.8 million to address one-time capital and personnel costs related to the floods and expects that $8.8 million will be reimbursed through federal funds and insurance.
Additional draws are expected, but the city of nearly 121,000 has said it will maintain reserves at 25% of general fund revenues. Its debt burden is low, but due to reconstruction needs caused by the flooding the city plans to issue between $90 million and $150 million of new debt over the next three years.