NEW YORK - Moody's Investors Service has downgraded the city of Windsor Heights, Iowa's general obligation unlimited tax rating to Aa3 from Aa2, affecting $12.8 million of post-sale general obligation unlimited tax debt.
Concurrently, Moody's has assigned a Aa3 rating to the city's $1.4 million general obligation refunding capital loan notes, Series 2012A.
The bonds are ultimately secured by the city's unlimited general obligation pledge, though the city expects to repay debt service out of tax increment financing (TIF) revenues from its urban renewal tax increment fund.
The downgrade to the Aa3 rating reflects the small size of the city's tax base with significant taxpayer concentration, a trend of moderately declining valuations, and declining trends in the city's socioeconomic indices.
The Aa3 rating additionally incorporates the city's favorable location in the Des Moines (Aa1) metropolitan area; above average income indices; our expectations for a continued strong financial position; and a somewhat elevated debt burden.
Bond proceeds will be used to refund the city's Series 2002 notes in order to restructure the amortization schedule. The Series 2002 notes had an original maturity date of 2014 with two balloon payments in 2013 and 2014.
The original bond proceeds were used for widening and improvements on University Avenue, including sewer and storm sewer improvements. The current offering will restructure the balloon payments to extend maturity through 2018, still within the useful life of the project, in order to allow the TIF fund to generate additional revenues to repay the debt.
