A new credit report issued by an international rating agency found that the city of Auburn's finances are healthy and the city poses a low credit risk to investors.
Moody's Investors Services last week gave the city the same rating it received last year, though the report said Auburn's financial health has "much improved" due to increases in utility rates and fees and the closure of the failed co-gen facility.
Moody's gave the city a rating of A2. According to its website, Moody's issues a range of 9 different letter ratings, starting with Aaa for highest quality/lowest credit risk and ending with C for the lowest quality/highest credit risk.
Ratings in the A category, where Auburn is slotted, are defined as "upper-medium grade and are subject to low credit risk." A number scale of 1 to 3 is also given within certain letter rating categories, with Auburn's 2 score reflecting "mid-range ranking" within its general category. A spokesperson from Moody's said the city's rating indicates to investors that the city has a high likelihood of paying back bonds on time and in full.
One point of concern the report mentioned was the city's "elevated debt." According to city Comptroller Rachel Jacobs, as of the city's 2016-2017 fiscal year, the city holds just over $74.7 million in total debt. Jacobs said she has not finished her year-end processing for the past fiscal year, but noted that the city made around $6.6 million in principal payments during the 2017-2018 fiscal year.
Approximately $38 million of the city's outstanding debt is subject to its constitutional debt limit, which is how much debt is city is able to incur, Jacobs said. The limit is enacted by the state and determined based on each municipality. The city is currently utilizing 56-percent of its debt limit.
In an email to The Citizen, Jacobs explained that the debt limit is a percentage of "the five-year average full valuation of taxable property within the city." Certain debt, such as that issued for water supply and distribution, some sewer projects and some types of short-term borrowing, is excluded from the limit, she said.
Since March of this year, the Auburn City Council has authorized six new bond ordinances, totaling nearly $13.5 million, for projects such as water main repairs along North Street, upgrades to the wastewater treatment plant and to install turf at Falcon Park.
According to the report, the city's main strength is its "moderately sized, diverse tax base with some government and health-care presence."
City Manager Jeff Dygert said the report is positive and "shows some stability." He said the city is not too worried about its debt because a majority of it is going toward infrastructure projects "that will be important to the future of the city." He noted that some factors, such as obligated pension contributions, are "out of our control."
"Overall, the things city staff and the council have done over the past few years have put us in a good position," Dygert said. "We're taking care of things that have been put off for years, if not decades."
He added that the city is seeing "unprecedented" investment from the private sector, citing projects such as the Schine Theater restoration and those listed in the city's successful $10 million Downtown Revitalization Initiative application with the state.
"We have to invest in infrastructure to make the city an attractive place for development," Dygert said.