The city of Gainesville received a notch downgrade to its issuer credit rating on Monday, with Moody’s Investors Service dropping the rating from Aa2 to Aa3.
Gainesville’s issuer credit rating signals to third parties the financial stability and security of the city. Third parties—like banks, suppliers, joint-venture partners, brokers—use the rating to evaluate partnerships.
Mayor Harvey Ward said the downgrade comes after a change in rating methodology, not because of any new financial situation. Moody’s now includes Gainesville Regional Utilities (GRU) when evaluating the general city government’s financials.
He also said the general government side received the downgrade, so utility rates wouldn’t see an impact.
“The truth is it’s kind of a matter of course, and not something that that I feel is going to change the way anyone does business,” Ward said in a phone interview. “So, we’ll continue to provide good service, both through the utility and general government, to our neighbors here in Gainesville.”
The Moody ratings range from Aaa to Baa3 in the investment grade level, with 10 total steps. A rating of Aa3 is the fourth highest and keeps Gainesville in the high-grade tier, one step above the upper-medium tier.
In a press release, the city noted its financial outlook, as given by Moody’s, remains stable. The city’s non ad-valorem rating will not change as a result, remaining at Aa3.
The city currently backs up 80% of its debt with GRU. And Ward said GRU’s significant debt presents the problem.
“We’ve taken on debt because we’ve responded to the community’s interest in renewable energy, and that has come at a cost,” Ward said.
GRU has faced multiple downgrades in the past decade, and the utility’s finances have continued as a discussion topic, from the biomass plant to the general fund transfer.
But Ward said GRU remains in a strong position and is still considered an investment grade utility.
Mayoral candidate Ed Bielarski, who previously served as general manager of GRU, campaigned on a financial stability platform leading into the November 2022 elections. He said the city commission had forced GRU into poor positioning and pointed to the general transfer as one of the problems.
In 2021, GRU sent $38 million in revenue to the general government side of the ledger as part of the annual fund transfer. The city commission voted to lower the transfer, bringing it to $26 million annually by 2027.
The city government has also faced issues with its finances.
Last year, the city ran afoul of the state’s Joint Legislative Auditing Committee (JLAC) when it failed to turn in a financial audit by the summer deadline, and Moody’s placed Gainesville and three other cities under review because of a lack of financial information on Oct. 12.
However, new city staff rallied to meet the Dec. 19 extended audit deadline.
Gainesville received notice on Monday that the JLAC requested an in-person update concerning the state’s legislative audit of the city. Ward will travel to Tallahassee on Feb. 9 to deliver.
“Of course, we’re going to be entirely responsive and turn schedules around, and I will be there with staff,” Ward said.
Ward called the request a surprise since dozens of other cities also underwent a legislative audit, but he isn’t aware of any other cities giving in-person reports. Ward said the city assumed the audit was finished after filing.
Moody’s Investment Service rating categories:
- Aaa – highest rating, representing minimum credit risk
- Aa1, Aa2, Aa3 – high-grade
- A1, A2, A3 – upper-medium grade
- Baa1, Baa2, Baa3 – medium grade
- Ba1, Ba2, Ba3 – speculative elements
- B1, B2, B3 – subject to high credit risk
- Caa1, Caa2, Caa3 – bonds of poor standing
- Ca – highly speculative, or near default
- C – lowest rating, bonds typically in default, little prospect for recovery of principal or interest
Poe and company caused this mess at the expense of taxpayers
You won’t print this!
This new Mayor in total dissalulishment . No one other than the COG Commision and GRU wanted a 2 billion dollar Biomass Plant , Period. The cost and debt incurred is sinking Gville and invited another well deserved State Audit.
The previous Mayor, City Manager (and current), CC, couldn’t care less what they are doing to GNV! They voted themselves a 90% raise, bypassed Merit Promotion requirements and promoted cronies into current management positions, of course voted in a GRU continued rate increase for the previous 2 years and an additional 4 to pay their salaries and BS projects! This is a direct reflection of the CCP in DC led by Commy Joe, taught the Mayor during his visit last month!