CHICAGO - Moody's Investors Service downgraded St. Louis one notch citing the city's weak socioeconomic profile, reliance on an earnings tax, high debt burden and relatively narrow financial position.
The action on Aug. 14 lowered the city's general obligation rating to A1 from Aa3, its lease-revenue debt for essential services to A2 from A1, and its non-essential rating lease rating to A3 from A2. The lease-backed debt is subject to annual appropriation risk.
The city has $27.4 million of GOs and $123.5 million of essential purpose lease backed debt issued through the St. Louis Municipal Finance Corp. and $138.6 million of outstanding lease revenue debt issued for non-essential purposes through the corporation. The outlook on all ratings is stable.
The city's credit challenges "are balanced against several attributes, including a tax base that remains sizeable despite recent declines; relatively stable financial performance; recent declines in pension costs due to reforms; and a diverse economy that continues to serve as a regional hub for healthcare, higher education, and finance," Moody's said.
The city's stable outlook stems from recent moves by the city to cut expenses which ensure structurally balanced financial operations, an anticipated modest fiscal 2015 year-end surplus, and the expectations of balanced operations in fiscal 2016.
City Comptroller Darlene Green sought to highlight that the Moody's action stemmed in part from revised rating methodology.
"The city continues to manage these financial challenges in a fiscally responsible and prudent manner with strong financial management practices such as conservative budgeting," Green said in a statement. "The city has taken steps to increase revenues and decrease expenditures in order to strengthen its profile and increase reserves." The city anticipates a $2.3 million surplus this year.
The city's earnings tax must be renewed by voters next year.
Green expressed confidence that the earnings tax would be approved next year as it passed in 2011 by a margin of nearly 9 to 1.
City voters earlier this month rejected a $180 million bond measure.
