Moody’s Investors Service has downgraded Coralville, Iowa’s urban renewal tax-increment finance bonds from a 2007 issue two notches to Baa2 from A3 and warned of further action by assigning a negative outlook.

The move affects $34 million of TIF debt backed by an annual appropriation. The current rating is just two levels above junk bonds.

“The downgrade reflects the heavily-leveraged nature of the Mall/Highway 6 Urban Renewal Area, which supports general obligation bond obligations and other contractually-obligated rebate agreements, in addition to the TIF bonds,” Moody’s wrote.

The TIF has seen strong valuation growth of about 11% annually.

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