Fairfield receives bond upgrade

The city of Fairfield received some good news this week when it learned Moody's Investors Service upgraded its bond rating.

The city was at a Baa2 rating, but Moody's bumped it one step to a Baa1. The rating agency also gave the city of Fairfield a 'positive outlook.”

Fairfield City Administrator Aaron Kooiker explained that bond ratings affect the interest rate borrowers pay on loans. Cities with bad bond ratings can expect to pay high interest on their loans, and in some cases be denied loans entirely. That's why it's important to maintain a good bond rating.

Moody's wrote in its report that the upgrade was based on the city's improved financial position.

'The positive outlook reflects our expectation that sustained improvement in the city's finances and continued adherence to recently adopted financial policies over the next 12 to 24 months will place upward pressure on the rating,” the report said.

The report lists ways that Fairfield could bump its rating even further. This can be done by increasing the city's operating reserves, improvement in resident incomes and sustained tax base growth.

'We hope that next year we can move up into the A ratings with our positive debt balances,” Kooiker said.

Kooiker said it's difficult for the city to raise incomes all on its own. That's something it can encourage through economic development. In the long-term, Kooiker's goal is to lower the tax levy. Not only would this put more money back into the pockets of Fairfield's residents, it would also improve the bond rating.

The report listed things that would cause the bond rating to slide, such as contraction of the city's tax base, growth in the city's debt or pension burdens, and a weakening socioeconomic profile.

In 2015, Moody's downgraded the city's bond rating from Baa2 to Baa3. The rating agency cited the city's deficits, its limited financial flexibility given it was levying taxes at the maximum amount, and the likely issuance of new debt to fund the recreation center that was to open the following year.

Since then, the council and staff have been hard at work trying to right the city's financial ship. Shortly after the bond downgrade was announced in June 2015, the city sold Logan Apartments, which gave it an infusion of cash, $1.175 million to be exact. The council put in place a new set of financial policies to rein in spending, too.

Just a year later in September 2016, Moody's recognized Fairfield's achievements and returned its bond rating to Baa2 with a positive outlook.

Earlier that same year, Standard & Poor's gave the city an A rating, the third highest after AA and AAA. That translates to an A2 rating on the scale used by Moody's. Thanks to the good rating from Standard & Poor's, the city was able to refinance $6 million in debt, lowering its interest rate from 4 percent to 1.7 perfect, leading to $285,000 in savings.