Moody's Investors Service has downgraded to Baa1 from A2 the general obligation rating of the city of Virginia, Minn.
The city has $34.4 million of GO debt outstanding, of which $13.3 million is Moody's rated.
Moody's has also downgraded to Baa2 from A3 the rating on the city of Virginia's Housing and Redevelopment Authority's $16.2 million of outstanding lease revenue debt. The ratings have been removed from review.
The city of Virginia's outstanding GO bonds are secured by its general obligation unlimited tax (GOULT) pledge, although debt service is paid from a variety of sources including enterprise revenues.
The Baa1 rating reflects enterprise risk associated with a city owned hospital; sizable other post-employment benefit (OPEB) liabilities; and a weak demographic profile.
Also incorporated into the Baa1 rating is the city's modestly sized tax base that has experienced significant valuation drops; reduced though still adequate general fund reserve and cash levels; recent efforts to strengthen financial management practices; and high debt burden largely supported by non-levy sources.
The Baa2 rating on the city's lease revenue debt is based on the risk of non-appropriation; the essentiality of the financed hospital project; and the credit characteristics inherent in the city's Baa1 GO rating.
