Moody’s Investors Service Monday announced it has given its highest debt rating — “Aaa” — to Evanston’s new and existing bond debt.

And the agency labels the city’s future financial outlook as “stable.”

Moody’s Investors Service Monday announced it has given its highest debt rating — “Aaa” — to Evanston’s new and existing bond debt.

And the agency labels the city’s future financial outlook as “stable.”

Moody’s had downgraded the city’s rating by one notch, to “Aa1” back in 2007 as concerns grew about the city’s increasing pension liabilities and overall spending levels.

The firm Monday said it had “recalibrated” the city’s existing debt rating to “Aaa” on April 16, a move that was not widely reported at the time.

The “Aaa” rating applies to $14.5 million of new general obligation bonds to be issued this year as well as existing debt of $151.5 million.

Of the new debt, $6.5 million will be used to finance capital improvement projects and $8 million will finance a payment to the Illinois Municipal Retirment Fund to cover early retirement benefits for city employees.

Moody’s described Evanston as a “mature, affluent community” and said Northwestern University and the city’s two hospitals help provide a secure economic outlook for the city, despite their tax-exempt status.

It praised the city’s efforts to deal with declining revenue during the recession by laying off employees and limiting other expenses to reduce costs.

While noting that the city’s unfunded public safety pension liabilities continue to grow, the report says that risk is balanced by the city’s “unlimited ability to raise revenues” as a home rule community.

It says the city’s overall debt level is “slightly above” state and national medians, but is expected to remain manageable “with a sound amortization rate and moderate future borrowing plans.”

The Moody’s announcement follows a report last week by Fitch Ratings that affirmed that agency’s top-level rating for Evanston’s municipal debt.

Update 8/6/10:

Things are heading in the other direction for the City of Chicago. Chicago Business reports that Moody’s has cut the City of Chicago’s bond rating to Aa3, it’s fourth highest investment grade, from Aa2. Fitch Ratings issued a similar downgrade on Chicago’s debt Thursday.
 

Bill Smith is the editor and publisher of Evanston Now.

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12 Comments

  1. The emperor has no clothes

     

    This is the same company that rated all the Collaterized Debt Obligations AAA that crashed  and burned in 2008.  Buyers beware.  I guess $69 million in unfunded pension liabilities is nothing to worry about.

  2. Moody’s Rating

    Odd that they allowed their name to be used.  Because of the Finance Reform law they and S&P have told companies not to use their name for ratings because of legal implications.

    Tom Waterloo is correct about their rating history with CDOs.   The fact they don’t realize how much Evanston is in the hole makes me believe they have not  approved—new class sub-par cities get highest ratings.

  3. Great!

    So now we can rack up more debt more easily.  Great job, Wally.  Nice priorities.

    1. Lower interest

      So now we can rack up more debt more easily.  Great job, Wally.  Nice priorities.

      Why do you think that this means MORE debt?   It means that the City will be able to borrow at low interest rates.  That really is good news.

      Good job, Wally.  Now let’s show Moody’s that we are serious about getting our finances in order by closing some branch libraries and cutting union pensions.

       

      1. “Good job, Wally.  Now let’s

        "Good job, Wally.  Now let’s show Moody’s that we are serious about getting our finances in order by closing some branch libraries and cutting union pensions."

        LOL. Sure, the city will do that… And pigs fly.

         

  4. Unfunded Pension Liability just for Fire and Police is ~ $175mm

    The latest figures from the actuaries shows Fire and Police Unfunded Liabilities of almost $175mm. OPEB liability is ~ $ 12mm.

    Remember as an Evanston Taxpayer you are on the hook for : City of Evanston Debt, Cook County Debt, State of Illinois Debt and US Federal Government Debt – Add it all up – it’s not a pretty sight – You also must include Other Post Employment Benefits, OPEB, in the calculation.

    This debt load will strangle our children and grandchildren unless significant changes are made to the generous entitlement programs currently in place  – just look at what is happening in Greece – fast forward 20 years (maybe sooner) and that will be Illinois.

    When Evanston’s financial situation is considered a Triple AAA rating is difficult to justify. I guess the "home rule community" is the saving grace – UNLIMITED taxing authority. If Evanston is Triple AAA, what does this say about other municipalities ? Caveat Emptor.

    1. Sequel to “The Big Short”

      Sequel to "The Big Short" is going to be about municipal debt.  If you haven’t read the book yet, I would highly recommend it. 

      1. Along with “Big Short”

        Read Roger Lowenstein’s "While America Aged."  It tells the stories of General Motors, the New York City subway system and the City of San Diego [bankruptcy] and how over generous pension and other benefits to keep "labor peace" hurt these.

        EPL has copies—at least until the Council, unions and branch lovers find out about it.

         

  5. $200 Million

    Tom,

    Evanston’s total unfunded pension liability is approximately $200 million.  This includes police, fire, and municipal employees.  This fact makes Moody’s announcement more absurd.  I personally believe that municipal finances is the nearest ticking time bomb of the US economy. 

    1. I don’t trust Moody’s
      It doesn’t matter if you or I trust Moody’s. What matters is that the City’s rating is good, which makes it possible for the City to borrow at lower rates, thereby saving the City money.

      What is the point of these posts attacking Moody’s? If you think Moody’s ratings are garbage, don’t follow their advice when investing your money. If Moody gives the City a good rating, it is good news for taxpayers.

      1. Well, that’s a precisely the

        Well, that’s a precisely the point: the city is getting a free pass and the premise is bankrupt (that rating cannot be adequate), allowing to postpone the fiscal adjustment that is overdue. At the end, we’ll pay for it dearly.

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