MOODY’S RATING INDICATES CITY IS BEGINNING TO IMPROVE ITS CASH POSITION
But, bumpy road is forecast for near future

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Ernie Slottag 789-2235

Moody’s rating agency has downgraded the City of Springfield’s bond rating from Aa2 neutral to Aa3 negative. This rating reflects the city’s deteriorating financial situation and a weakened liquidity position. Moody’s indicates the near-term challenge will be to grow reserves so as to attempt to return the city to a stronger liquidity position.

“The new rating is a product of an economy that is still in recession and a recently approved City budget that provides only a modest fund balance,” Mayor Frank Edwards said. “This is why we must remain frugal and not be tempted to spend down what little fund balance we have. Uncertainties within the new fiscal year, including anticipated higher fuel prices and slow delivery of state monies, will likely chip away at our reserves.”

Moody’s cited the modest surplus and slight improvement in cash position as a positive indicator that the City’s financial picture is poised for improvement, although it may be spread out over a number of years. It also cited an improved outlook for the Self-Insurance Fund stating that a $2.9 million surplus in health care services has brought down the overall deficit.

The rating document cited the City’s overall debt position as favorable and manageable since direct obligations are a modest value and there presently are no plans for future general obligation debt. 

Moody’s wrote that the negative outlook reflects the expectation that the City will continue to face difficulties in the implementation of budget adjustments needed to improve financial operations, as future state funding levels remain uncertain, that will result in a stabilization of the City’s declining financial position. In addition, the liquidity position will continue to face pressure over the near-term as the City attempts to return to structural balance and surplus operations.