ROCKFORD — Citing escalating pension costs on the horizon, Moody’s Investor Services hit the City of Rockford with a credit downgrade Monday.
The city saw its general obligation debt take a hit, with its rating slipping from A2 to A1. While still a solid investment grade rating, Moody’s says the city’s outlook is negative due to a number of factors.
“We had expected a change in this rating, as we know the financial challenges faced by the City are severe,” Mayor Tom McNamara said in a statement.
Moody’s says it expects accelerated pension costs to impact the city in the near term. The city’s operating deficit and growing operating expenses, coupled with the inability to raise more revenues, were also cited as concerns.
“There are healthy indicators but we are clearly challenged by growing pension contributions that must be made,” said Carrie Eklund, City of Rockford Finance Director. “We continue to work with our partners in Winnebago County to explore consolidation options that could yield more efficiencies and possible cost savings in areas of operations.”
The city was recognized for its role as an economic hub in northern Illinois. And its operating reserves drew praise from Moody’s.
But Rockford’s lack of home rule authority presents funding challenges the ratings agency says it must overcome. The city is set to lose $1.5 million in general funds from the state under a new budget passed last week.
“We’ve started our budget process earlier than ever and I’m confident our Finance Task Force will leave nothing on the table as we look for opportunities to develop a realistic budget,” McNamara added.
The downgrade will mean higher borrowing costs for the city. However, Moody’s says many indicators could see the rating move back to A2, including expansion of the tax base and overall strengthening of socioeconomic indicators. R.