DALLAS — Moody's Investors Service downgraded the Unified Government of Kansas City and Wyandotte County, Kan. one notch to A1 citing budget issues and a high debt burden. The negative outlook returned to stable after the downgrade.
The downgrade from Aa3 comes in advance of a $61 million general obligation bond issue that will combine new money and refunding. The bonds are scheduled to price competitively Feb. 5. Springsted Inc. serves as financial advisor.
Moody's also downgraded the Unified Government's appropriation debt to A3 from A2.
After this sale, the Unified Government will have $324 million of long-term general obligation debt outstanding, $73 million of short-term GO debt, $8.1 million of appropriation-backed debt, and $9.45 million public building commission debt, according to Moody's.
The combined government has a "high debt burden that is not expected to decline in the near term," according to analysts Tatiana Killen and Adebola Kushimo.
"The stable outlook reflects our belief that the government's financial position will improve but remain somewhat limited in the near term, given a variety of revenue raising and expenditure reduction measures," Killen and Kushimo wrote.
Standard & Poor's said it also considers the debt burden high but maintained its AA rating with a stable outlook.
"The Unified Government is considering the issuance of approximately $12 million annually during the next several years for capital and development projects," S&P analyst Kate Choban wrote. "In addition, management feels that the overall debt burden as a percent of market value should decline as new developments and economic growth add value to the tax base in 2014 and beyond."
In the meantime, the county is struggling to achieve operational balance, narrow general fund reserves and liquidity, while depending on economically sensitive revenues, and having below average socioeconomic indices, the Moody's analysts said.
General Motors is the largest taxpayer, representing 3.1% of total assessed valuation in fiscal 2014. The local Fairfax Assembly plant employs 3,500 people, Moody's said. GM announced that it plans to invest $600 million for upgrades to the plant.
At 6% in October 2014, the Wyandotte County unemployment rate tracked above the state's 3.8% and nation's 5.5% levels.
The county added revenue from the Kansas Star Casino that opened in 2012 adjacent to the bond-funded Kansas International Speedway, adding approximately 1,000 jobs.
Cerner Corp., a medical technology company, is planning to expand its employment base with a new office complex that is expected to employ 4,000. Kansas City was also selected by Google, Inc. for a high-speed fiber internet project that may positively impact high-tech employment in the area, the analysts said.
Located on the Kansas side of the Missouri River, Wyandotte County's population of about 158,224 has stabilized from steady contractions in the 1980s and 1990s.
Due to a decline in property values and the state's launch of a machinery and equipment tax exemption, the county's assessed value dropped in fiscals 2011 and 2012 to an assessed valuation of $1.191 billion, and a true market value of $6.571 billion, analysts said. However, values rebounded in fiscal 2013 by 1.3% to $1.207 billion, or a true market value of $6.658 billion.