Moody's Downgrades DeKalb's General Obligation Rating

Aug 2, 2016

The decision to downgrade DeKalb's bond rating from Aa2 to Aa3 is based in part on the city’s pension liabilities.

According to a news release, this liability is due in part to the city using the lower funding level allowable by the State of Illinois, as well as a change to the Government Accounting Standards Board liability reporting requirement.

Moody’s also cited DeKalb’s declining tax base from 2009 to 2015 as a contribution to the rating but noted a tax-base increase in 2016 of 1.6 percent.

The release says initiatives by the finance department include efforts to decrease the unfunded pension liability and increase the city’s reserves. Efforts are also underway to expand the city’s revenue base and limit reliance on sales tax revenue. These factors will not be noted by Moody’s until the Fiscal Year 2016 audited financial statements have been finalized in December 2016.

In its report, Moody’s found financial operations and reserves continue to show improvement in creating solid reserves and a stronger financial position for the future.

Specific actions taken by the city to improve fiscal health include:

  • The City has increased its reserves over its 25% reserve fund balance policy in the last two years. This dollar amount, which was $22,169 in 2008, sits at more than $9,000,000 in 2016.
  • The City has enhanced its financial policies to incorporate several “Best Practice” policies. These policies are outlined in the City’s budget document.
  • The City adopted a ten year “Strategic Plan” this year, which was incorporated into the FY2016.5 budget document.
  • The City’s levy was increased in December 2015 to contribute an additional $824,156 to the pension funds to increase funding levels. This was a 21.60 percent increase over last year’s levy contribution. This increase also assisted in expanding the City’s revenue base to not be so reliant on sales tax revenue.
  • The City also increased two other revenue streams from video gaming fees and ambulance fees.