Marshfield (OnFocus) – At its September 8 meeting, the City of Marshfield Common Council discussed the City’s bond rating, budget update and next steps. Finance Director Ron Aumann presented on the recent credit rating from Moody’s, which dropped Marshfield’s rating from Aa1 to A1.
The City of Marshfield’s (GOULT: A1 negative; lease: A3 negative) general fund balance continues to support other city funds, which could increase pressure on an already narrowed cash and fund balance. The City is trying to resolve its structural deficit in the debt service fund over the next few years.
At this point, Aumann said that the City will need to either increase taxes or face a downgrade in the City’s credit rating.
“[Moody’s] gives two main reasons for the negative outlook,” said Aumann. “One, structural deficit in the debt service fund that we were well aware of. We under-levied for the better part of a decade and we are still feeling the effects of that. We haven’t caught up levy-wise to our actual.”
“The second one they give is continuing narrowing city liquidity,” Aumann continued. “That’s a nice way of saying we are deficit spending and burning through cash. I’ve said all along you have a slew of unpopular choices to make. Right now, it’s raise the levy so we are paying our debt or look at further deterioration of our financial situation – probably another downgrade. Those are our two choices.”
He added that staff can do what they can with the General Fund, but the debt service part is down to those two choices.
Positively, the city has seen steady repayment of advances from tax increment districts (TID) funds. Additionally, the city benefits from a growing yet moderately-sized tax base, role as a regional economic center anchored in health care, and moderate pension liabilities. Debt is elevated and the city anticipates the continuation of annual borrowing at $3 – $4 million.
On August 27, 2020, the City affirmed the City’s general obligation unlimited tax (GOULT) rating at A1 and lease rating at A3. The outlook was revised to negative.
Credit challenges include continued narrowing of the city’s liquidity, structural imbalance in the debt service fund resulting in an advance from the general fund, concentration in top employer and taxpayer, and elevated debt burden with plans for annual issuances.
According to the agenda packet, the negative outlook reflects the potential for continued general fund advances to support other funds which could pressure city finances. Presently, the TID advances are expected to be repaid over the next few years which will likely counterbalance some of this pressure.
Aldermen will continue developing the 2021 budget and present next month.
“The unfortunate thing is, when the taxes go up the city is blamed,” said Alderman Tom Witzel. “It is unfortunate that this is all happening during a pandemic, with everything else happening, Unfortunately I think the piper is here and we’re going to have to pay… it’s going to be an ugly situation for the next couple of months, I think.”
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