SAN FRANCISCO — The Reno, Nev., Redevelopment Agency’s financial woes had little impact on Moody’s Investors Service’s decision to downgrade the city of Reno’s general obligation limited-tax bonds a notch to Aa3 from Aa2 and give them a negative outlook, analysts said.
The downgrade affects $7.4 million of GO limited-tax bonds, $92.5 million of GO limited-tax revenue bonds, $45 million of GO limited-tax medium-term bonds, and $21.9 million of assessment bond backed by the city’s GO limited-tax pledge, according to the report.
Standard & Poor’s downgraded the RDA’s debt to CC in November as it struggled to pay off $2.9 million in bond payments on its $36.5 million of outstanding debt. Moody’s doesn’t rate the RDA.
The RDA has filed a lawsuit against Washoe County that disputes the formula the county uses to determine the amount of property tax revenue the agency receives.
“The city is not named in the lawsuit — the county and other overlapping entities are,” said Moody’s analyst Matthew Jones. “The other jurisdictions stand to gain more from redistribution than the city.”
Reno officials included a $600,000 maximum liability to the RDA in their 2012 budget, which isn’t a significant amount in a city that has projected revenues of $163.7 million, Jones said.
Robert Chisel, Reno’s finance director, said the city doesn’t plan to issue new debt in the near term, so the potential increased cost of debt from the downgrade isn’t an issue right now.
Even after the decline in assessed value over the past three years, the city reported an estimated $17.27 billion in total property valuation. The key drivers in the downgrade include a trend of operating deficits resulting in a drawdown of reserves. The city hopes to increase its reserves to $6.5 million from the 2011 level of $5.5 million or 3.3% of revenues, according to the Moody’s report.
“One of the weaknesses with Reno is that their reserve levels are thin in good times. They are not the most conservative budgeters,” said Dan Steed, a lead analyst at Moody’s.
