City of Evanston has received high rankings from the two major bond-rating firms for the $12.6 million in bonds set for sale on Aug. 6. The sale of these 20-year general obligation (G.O.) bonds will finance a portion of the City’s annual capital improvements plan and purchase major equipment with extended life-cycles, according to the City.
The ratings show the credit-worthiness of the bond-issuer. Moody’s Investors Service again gave the City an Aa1 rating, and Fitch’s rated the City as AA+.
A statement from Moody’s about the rating said the City will have $163.2 million of general obligation debt. “Debt service [interest payments and the like] on Evanston’s G.O. debt is secured by the city’s G.O. unlimited tax pledge” – that is, there is no limit to the amount of taxes the City can levy.
Moody’s said the Aa1 rating “reflects the City’s declining but still sizeable tax base; economic stability provided by Northwestern University (Aaa stable); satisfactory financial position; revenue-raising ability afforded by the City’s status as an Illinois home rule unit of local government; somewhat elevated debt burden; and sizable pension liabilities.” Fitch’s assessment was similar.
Both Fitch and Moody’s listed among Evanston’s strengths its higher-education and health-care institutions, an “affluent and diverse tax base that plays a key role in the Chicago regional economy,” a “strong management team with a history of making expenditure reductions and adjustments to address pension liabilities” and the flexibility offered by its home-rule government.
The City’s pension liabilities, its “elevated debt” and the recent declines in the tax-base valuation were listed as challenges by both Moody’s and Fitch. Fitch, though, said the “aggregate debt burden appears manageable.”
Fitch’s assigned the AA+ rating to the City of Evanston, noting that the bonds are “secured by the City’s full faith and credit” and its unlimited tax rate, and asserting the “rating outlook is stable.” Like Moody’s, Fitch considered the “superior socioeconomic profile” of Evanston residents “as evidenced by high wealth, employment and education levels” and the flexibility offered by home rule.
Fitch also referred to the City’s pension challeges, noting that both the police and firefighters pension funds are “severely underfunded.” It said the City’s reserves are “healthy” and “sound,” however.
The entire report is available at cityofevanston.org/.credit-rating.