CHICAGO — West Fargo, N.D.'s general obligation and sales tax revenue credits were cut one level to A1 by Moody's Investors Service, which cited the city's growing debt load.
The action comes ahead of the city's sale of $24.5 million of general obligation refunding bonds slated for later in December. Proceeds will finance various street and water district improvements. The city intends to repay the bonds with special assessment revenues from property owners benefitting from the projects.
The rating action affects $221 million of GO debt and $1.7 million of sales tax bonds.
"The A1 GO rating incorporates the city's highly elevated debt burden, which is expected to grow with in the near term with future issuances," Moody's said in a Nov. 30 report.
The GO rating reflects a growing suburban tax base that benefits from a robust regional economy, healthy financial profile supported by strong management policies, and ample reserves.
The sales tax revenue rating reflects strong debt service coverage by pledged revenues, satisfactory legal covenants with a debt service reserve requirement and annual revenue segregation, a strong economic base experiencing growth and the lack of a trustee intercept. There's no distinction between the city's sales tax revenue and GOs due to the strength of the pledged revenues, which are dedicated solely for capital improvements per city charter and cannot be used for the city's general operations. The city levies a 1% general sales tax.
The city is located in east central North Dakota in the Fargo-Moorhead metropolitan area. Its population has nearly doubled over the last 13 years hitting 27,014 at the end of 2013.