Moody’s Investors Service released Wednesday that they had affirmed the A2 rating for the City of Owensboro, which would remove the negative outlook for the $136 million of outstanding rated general obligation bonds.
What does this mean for the city?
According to City Manager Nate Pagan, when a city takes out a bond, or a loan, an investment company gives the city a rating based on an objective analysis of the city’s financial standing. Moody’s is the New York-based bond credit rating business responsible for giving Owensboro their rating.
Owensboro previously had an A2 rating with a negative outlook. The outlook determines which way the city is trending, therefore a negative outlook represents a negative trajectory.
The city of Owensboro has maintained its A2 rating, but no longer has a negative outlook.
An A2 rating is considered a high rating, meaning the city is a lower investment risk, and will also receive a lower interest rate.
The rating, Pagan said, “is not unlike a grade at school.” An A2 rating is the third highest credit rating given by investment companies such as Moody’s.
By maintaining the higher rating and dropping the negative outlook, the city is also still able to maintain itself as creditworthy. While only the outlook has changed, which is not uncommon, this typically only occurs when new debt is being issued.
The City of Owensboro currently has no new debt and is not planning on incurring any in the near future, according to Mayor Tom Watson.
“We already have $100 million in general obligation bonds that are on the taxpayers,” Watson said.
Watson voiced his pride in his staff and the city commission for “biting the bullet and increasing taxes.”
“For eight years the commission didn’t take the property tax increase,” Watson said. “I think that made as much of a difference to Moody’s as anything. That we were willing to increase tax revenue to offset debt.”
Overall, the Moody’s rating was “a win for the community and a win for the commission,” Watson said. “It’s like the age of Aquarius; all the stars were aligned.”