Fitch Ratings this afternoon announced it’s holding its rating of Evanston’s general obligation bonds steady at “AA+.”
That contrasts with a decision by Moody’s Investors Service on Wednesday to downgrade the city’s bond rating one notch from “Aa1” to “Aa2.”
The city is scheduled to issue $22 million in bonds, partly to refinance existing debt, next Wednesday.
Fitch said its rating decision is based on the city’s “strong independent revenue-raising ability, moderate long-term liability burden, and robust financial flexibility.”
The agency, in a news release, said Evanston’s “somewhat uneven general fund operating performance since the 2009 recession” reflects a trade-off between management’s desire to preserve service levels and increase annual pension contribution funding, while insulating residents from significant tax increases.”
It says the city “has kept up with necessary capital spending and improved its funding of annual pension contributions, but general fund reserves have declined, albeit to still-healthy levels.”
Fitch says it expects the city’s revenue growth to be roughly even with inflation but its natural rate of expenditure growth is expected to be higher than the revenue growth rate. — which could require new revenue sources or reduction in expenditures.
It says Evanston “has a very strong socioeconomic profile as evidenced by high wealth and employment levels. Proximity to Chicago and Evanston’s own diverse economy provides abundant employment opportunities. Residents are highly educated with 66 percent of the population attaining at least a bachelor’s degree versus 30 percent nationally. The city’s unemployment rate has historically been below those of the state and U.S.”
Moody’s had blamed a multi-year erosion in city reserves and growing unfunded pension liabilities for its rating downgrade.
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