Moody’s Investors Service downgraded Burlington, Vt.’s general obligation bond rating to A2 from Aa3, affecting approximately $87 million of the city’s outstanding parity debt. The bonds are secured by a GO unlimited tax pledge.
Moody’s also downgraded the city’s outstanding A1-rated certificates of participation to A3 and its outstanding A2-rated COPs to Baa1, affecting $4 million and $10.4 million of outstanding COPs, respectively.
The downgrade reflects the city’s reduced liquidity due to use of its pooled cash account to finance expansion of Burlington Telecom, the city’s telecommunications enterprise. The rating also factors in the city’s inability, through those telecom operations, to make successive lease payments to CitiCapital, resulting in draws on the debt service reserve fund for debt service.
The negative outlook reflects the possibility of further downgrades in the near term.
Burlington is actively pursuing a viable solution for the telecommunications system, but uncertainty remains about its ability to place it on a more sustainable path.
The city’s fiscal 2009 financial statements included $15.05 million due to the city’s pooled cash account from Burlington Telecom through June 30, which has grown to about $17 million.