City of Dubuque General Obligation Bond Sales Generate $4.5 Million in Savings and Water Revenue Bonds Credit Rating Upgraded
Mike Van Milligen, City Manager
May 6, 2021 -- For Immediate Release
DUBUQUE, Iowa – The City of Dubuque’s strong financial condition was affirmed by Moody’s Investor Services twice this week and general obligation bonds sold this week generated $4.5 million in interest savings for the City.
“These acknowledgements by Moody’s confirm the Mayor and City Council’s financially sound decision-making. In the next fiscal year, Dubuque will have the second lowest property tax rate of Iowa’s largest cities, a general fund reserve of nearly $18 million, and will be at just 45% of its statutory debt limit,” said Dubuque City Manager Mike Van Milligen. “That leadership has put Dubuque in a strong position to capitalize on favorable financial markets and make critical investments in the community.”
Mayor and City Council Sound Financial Management Saves Taxpayers $4.5 Million in Interest Payments
On Monday, the City sold $29.5 million in tax-exempt general obligation bonds and $12.5 million in taxable general obligation bonds, receiving a 1.36% rate on the non-taxable bonds and 1.62% rate on taxable bonds.
Of the $42 million in bond revenues, nearly $37 million will be used to refund previously issued debt. The favorable rates will save the City $4.5 million in interest over the life of the current debt that is being refinanced. The remaining $5 million will fund a variety of projects.
This general obligation bond issuance follows a credit opinion report from Moody’s earlier in the week that affirmed the City of Dubuque’s credit rating of Aa3 on all outstanding general obligation bonds.
Water Enterprise Revenue Bonds Credit Rating Upgraded
Moody’s upgraded the City of Dubuque’s Water Enterprise’s outstanding revenue bonds to A1 from A2 . The water enterprise has $28 million in long-term debt, of which $4.2 million is outstanding revenue bonds.
Moody’s said the upgrade to A1 reflects the water enterprise’s “very strong cash position, updated system condition, and strong capital and operational planning with unlimited rate setting authority.” The rating also incorporates a moderate debt burden, strong debt service coverage on senior lien parity debt which narrows but remains adequate when considering total debt service coverage.
Moody’s provides credit ratings and research covering debt instruments and securities. The purpose of Moody’s ratings is to provide investors with a simple system to gauge future relative creditworthiness of securities. The firm uses nine rating classifications to designate least credit risk to greatest credit risk: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C. Moody’s appends numerical modifiers 1, 2, and 3 to each rating classification. Revenue bonds rated A are judged to be upper-medium grade and are subject to low credit risk. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category.
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