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Ratings agency downgrades city’s bonds

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Moody's Investors Service Wednesday downgraded the City of Evanston's general obligation bond rating to Aa2 from Aa1.

The agency said the downgrade reflects a multi-year erosion in city reserves and growing unfunded pension liabilities.

It said that balancing those ongoing pressures were the city's sizable tax base, revenue raising flexibility, still sound reserve levels and strong economic profile anchored by Northwestern University, which has an Aaa stable rating.

Lower bond ratings lead to higher interest charges on bonds, which creates added burdens on local taxpayers.

Moody's said that two factors could lead to an upgrade of the city's rating — reduction in the city's debt and pension burden or sustained strengthening in financial operations leading to significant growth in reserves and liquidity.

By contrast, further declines in operating reserves or increases in debt levels or pension liabilities could lead to a further downgrade.

Evanston had had the rating agency's highest, Aaa, rating until a downgrade in 2007 to Aa1. It then regained the Aaa rating in 2010, and was cut back to Aa1 in 2013.

The city is scheduled to issue $22 million in bonds, partly to refinance existing debt, next week.


Update 7:45 a.m.: Contacted this morning, the city's chief financial officer, Marty Lyons, said he'd have a statement responding to the action by Moody's later today.

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