Moody’s Downgrades City’s General Bond Obligation Bonds On Concerns About Declining Fund BalancesTOPEKA, Kan. – Moody’s Investors Service notified the City of Topeka today that it has downgraded the City’s general obligation bond rating one step, from ‘Aa2’ to ‘Aa3.’
“While we are disappointed in the outcome,” City Manager Jim Colson said, “we hear the message loud and clear: we need to balance our budget and rebuild our liquidity.” Colson restated his commitment to double the fund balance in the general fund within five years. “We will be working actively with the City Council during annual budget planning and throughout each year to focus on restoring general fund balances to at least 15-percent of our annual general fund revenues.” Colson indicated his belief that the City would pay somewhat increased borrowing costs as a result of the downgrade, but believed the City would continue to experience strong access to the municipal market despite the Moody’s action.
Moody’s indicated that although many features about the City’s finances and economy are unique due to its position as the state capitol and a regional center for commerce, its level of general fund balance was inconsistent with other cities rated ‘Aa2.’ The City’s new rating of ‘Aa3’ is the fourth highest available from Moody’s. Moody’s upgraded the City’s general obligation bond rating from ‘Aa3’ to ‘Aa2’ in 2010. Prior to that change, the City had been rated ‘Aa3’ for more than a decade.