Moody’s Investors Service upgraded the city of Kent’s issuer and limited tax general obligation ratings from A1 to Aa3, and upgraded the city’s consolidated local improvement district bonds from A2 to A1.
Previously categorized as stable, the rating outlook is now positive, according to a Dec. 7 Moody’s report released on Monday in a city news release.
The upgrade from A1 to Aa3 reflects continued improvement of the city’s finances, including the increase of reserve levels and the substantial reduction of interfund loans. Expected losses in revenues in 2019 and 2020, as well as continued support for the city’s public facilities district (that oversees the accesso ShoWare Center) are moderating factors to this upward trajectory.
The rating also takes into consideration the city’s strong tax base and economy, healthy socioeconomic measures, and manageable debt and pension liabilities.
The A1 rating of the city’s consolidated local improvement district bonds reflects the general credit strength of the city, but more limited property tax support for those bonds in the form of the Local Improvement Guarantee Fund.
The city’s rating outlook was revised from stable to positive. In recent years, the city’s tax base and financial performance has been strong, driving the current upgrade.
Although the city faces some financial challenges through 2020, Moody’s expects the city to make appropriate adjustments to mitigate the challenges, resulting in a flattening of financial trends and stabilization of the city’s financial reserves. No other material changes in the city’s rating factors are expected during this period.
“Congratulations to Mayor (Suzette Cooke) and the City Council for their continued work to get the city back on a firmer standing financially,” said Aaron BeMiller, city finance director. “We still have some work to do in the coming years, but we are starting from a really good base. Over the past few years, Moody’s has increased the city’s rating five steps, which is absolutely amazing.”
Moody’s Investors Service is a leading provider of credit ratings, research and risk analysis. Gradations of credit worthiness are indicated by rating symbols (Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C) with Aaa having the least credit risk and C having the greatest credit risk with modifiers of 1, 2 and 3 for each rating classification.
Moody’s issued a city credit review in September 2012 and downgraded the city to a Baa2 rating from A1.
Since that time, the city has added a business and occupation tax, a 6 percent tax on cable, telephone, cellphone and electric companies, increased the garbage tax as well as water and sewer rates. City leaders also boosted the cash reserves in the general fund to about $18 million and paid off debt.