City of Rugby’s credit rating downgraded
Standard & Poor’s Global Ratings has lowered the city of Rugby’s credit rating.
Discussed at the Rugby City’s Council’s regular meeting Monday evening and at the city’s Finance Committee meeting on Nov. 16, S&P downgraded the city’s issuer credit rating from ‘A+’ to ‘A,’ and the city’s 2013 refunding improvement bonds from ‘A’ to ‘A-‘.
S&P’s rationale for the downgrade is a “weakening in the city’s reserves” to levels considered nominally low and other factors, including a “weak” economy, “weak” debt profile and “lack of financial management policies and well-embedded practices in key areas” considered important by S&P in maintaining credit quality.
S&P considered Rugby’s economy “weak,” based on a projected per capita effective buying income (money after taxes) of 102.4 percent of the national level and per capita market value of $56,354.
City’s management was also viewed as “weak,” citing a ratings change of Financial Managment Assessment on finanical policies and practices from “standard” to “vulnerable.” S&P revised the city’s FMA due to finding it had not observed a fund balance policy or target, and the city council was not receiving adequate routine budget-to-actual reports during the year.
S&P viewed Rugby’s debt profile as “weak,” with total debt service at 35.3 percent of total government fund expenditures and net direct debt at 236.7 percent of government fund revenue. S&P found a positive credit factor in that over 79 percent of the city’s direct debt is scheduled to be paid off within 10 years.
S&P found the city’s budgetary performance “adequate,” with a surplus of over 35 percent in all government funds in fiscal year 2014, despite deficit operating results of 15 percent of expenditures in the general fund.
S&P found the city has “strong” budgetary flexibility, with a cash reserve of 66 percent of operating expenditures in FY2014. The city’s reserves at $476,000 were considered nominally low and a negative credit factor. In FY2016, S&P’s projections showed reserves declining to $250,000 and stabilizing around that level in FY2017.
S&P found the city’s financial liquidity to be “very strong,” with available cash at 1.6 times total government fund expenditures and 4.4 times governmental debt service in FY2014.
S&P said it does not expect ratings to change in a two-year outlook horizon. However the rating be upgraded if financial practices change, or downgraded if reserves are used further.
Rugby Mayor Arland Geiszler said Monday evening he couldn’t see any issues the downgrade in credit rating could cause in bonding and that after the Water Plant improvement project, the city should be “back on agenda” of building up financial reserves.
“This is a good example of what happens when you don’t keep reserves in place,” Geiszler said.
(sub.) Other actions
— The council accepted gas and diesel bids from Harper Oil for a 10 cent discount per gallon effective Jan. 1, 2017; from Tesoro for a 12 cent per gallon discount; and from Envision for a 3 cent per gallon discount at the pump, bulk propane at 10 cents discount from daily price and bulk gas/diesel delivery at 13 cents discount from daily price.
— The council approved beer, liquor/wine license renewals for Gryphon Liquors, Dakota Farms/Northern Lights Lounge, Northside Lounge, American Legion Post #23, Cobblestone Inn & Suites, 3rd Street Station, Big Pauly’s, Coffee Cottage, I.C. Dubbles and Lee’s Bar.
— The council approved a motion to allow permanent, full-time, elected and appointed city officials to purchase city-labeled clothing in amounts not exceeding $65 from i design.
— The council approved a motion to allow Police Chief John Rose to have repairs not exceeding $19,927.12 done to hail-damaged police units.
— The council approved a maintenance contract from AquaPure for $425 per month, on recommendation from the city’s Public Works committee.
— The council approved permit requests from Barton Sportsmen Club for a fundraiser on Feb. 25, 2017 at the American Legion Hall; for Catholic Daughters for a raffle at Little Flower Catholic Church starting Dec. 10 and ending March 12, 2017; and for RHS Girls Cheer Camp members for a raffle beginning Dec. 5 and ending April 29, 2017.
— The council accepted a letter of retirement from Deputy Auditor Phyllis Johnson, effective Dec. 23. The council also approved a pay raise for Candy Munyer, who is moving into Johnson’s position, from $19.45 to $20.73/hour effective Jan. 1, 2017.
— The council approved the November meeting minutes, bills and financial statements, Municipal Judge’s report and Job Development Authority board meeting minutes.
Ward 4 Councilman Chuck Longie and Ward 2 Councilman Randy Fossum were absent for the meeting.
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