JANUARY 23, 2025

Moody’s Ratings has assigned an Aa2 rating to three series of general obligation bonds that the City of Dubuque will soon issue to fund approximately $24 million in improvement projects. Moody’s ratings range from Aaa (highest) to C (lowest), with 19 different designations in between. This rating maintains Dubuque’s existing Aa2 rating, which is the third-highest possible rating.

The bonds will finance various projects, including:

– Nearly $6 million for fire station improvements and new equipment, including two ambulances, a ladder truck, a pumper fire engine, and a rescue boat.

– Nearly $9 million towards the Iowa Amphitheater project on Chaplain Schmitt Island.

– $3.2 million to implement parking system improvements.

– The remainder for new solid waste collection trucks, improvements to ImOn Ice Arena, and taxiway improvements at the Dubuque Regional Airport.

Moody’s credit analysis states, “The City of Dubuque’s local economy benefits from its role as a regional economic center, with solid resident income and full value per capita. Financial operations are strong and will remain so despite declines in fund balance over the next few years, as it expends funds from the pandemic. Long-term liabilities and fixed cost ratios are moderate and will remain so despite future borrowing needs.”

According to Moody’s, the Aa2 issuer rating for the City of Dubuque’s bonds reflects the city’s healthy economic base, which serves as a regional economic center. Other rationale cited for the rating include:

– Full value per capita and adjusted resident income are solid at around $109,000 and 98%, respectively. However, these figures are weaker compared to Aa peers, partly due to the city’s large student population.

The City of Dubuque’s financial health is robust, with a strong available fund balance of around 60% of revenue at the end of fiscal 2023 (year-end June 30). Cash reserves are even stronger, standing at 85% of revenue. Despite planned draws in fiscal 2024 and fiscal 2025 to spend down federal funds from the pandemic, the City’s available fund balance is expected to remain well over 45%.

Revenue-raising flexibility remains strong due to the City’s significant margin in its employee benefits fund and its decision not to utilize its emergency levy.

The long-term liabilities ratio will likely remain well below 300% inclusive of current issuances and future borrowing plans, while the fixed-costs ratio will stay well below 20%.

Moody’s upgraded the City’s rating to Aa2 in July 2023. This improved rating enhances the City’s ability to secure favorable terms for financial products like loans, resulting in substantial savings for the City and taxpayers. According to Moody’s, the upgrade was attributed to the City’s strong financial operations, ample revenue-raising flexibility, and steadily improving available fund balance and cash. The City’s role as a regional economic center, coupled with its regional economic growth rate outpacing the nation over the past five years, further contributed to the rating upgrade. Additionally, the City’s diverse commercial and industrial industries, stable population, and steady tax base growth are expected to support its strong local economy.

The full rating announcement issued by Moody’s on January 23, 2025, can be viewed at https://cityofdubuque.org/DocumentCenter/View/60131/Moodys-Rating-Action-Moodys-Ratings-assigns-Aa2-to-City-of-Dubuque-IAs-GO-Bonds.

The Dubuque City Council approved the issuance of the bonds following a public hearing on January 21, 2025. Following the sale, the City will have approximately $245 million of total debt outstanding, which is less than 38.5% of its statutory debt limit. As part of its debt-reduction strategy, the City strategically issues debt annually, with more debt being retired than issued.

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