The Gazette covers City Hall, now a flood-damaged icon on May's Island in the Cedar River

City Hall pushes its pretty face: Makes pitch to keep its top Aaa bond rating

In City Hall on March 31, 2008 at 11:03 pm

So this is how a piece of the world of big finance works:

Early Monday afternoon, many of the top City Hall faces were sitting around the big table in the City Council chambers talking via a conference call and Web cast to Jeannie Iseman, an analyst in Chicago with Moody’s Investors Service.

The city was providing Iseman with key economic details about the city of Cedar Rapids and about the city’s government as City Hall readies to sell about $24 million in general obligation bonds to obtain money to make improvements to the city’s infrastructure.

The city wants Moody’s to once again give the city its top bond rating, Aaa, which the city has enjoyed for more than 30 years and which translates into lower interest payments.

In Monday’s session, Iseman mostly listened, but she did make some comments:

She called it “very favorable” that, according to figures from the Linn County Recorder, the city has had only 39 housing foreclosures this year as of March 28.

In fact, Sue Vavroch, the city’s treasury manager, noted that foreclosures had been dropping here: there were 353 in 2005; 251 in 2006; and 116 in 2007.

Scott Labus, the city assessor, noted the market value of Cedar Rapids residential property has done up 2.5 percent and that home sales here in 2007 exceeded the numbers in 2005 and 2006.

Iseman also asked about the city’s 10-year financial plan, wondering how much the city would get done with cash on hand and how much with debt. Most of the money for the capital improvements in the plan will be paid for with federal and state dollars and local bond debt, Casey Drew, the city’s finance director, answered.

Iseman wondered if the city anticipated that its property-tax revenue would continue to come from the same mix of residential, commercial and industrial property.

City Manager Jim Prosser said Cedar Rapids had a good mix of property types, with one third of the value in the commercial-industrial sectors and two thirds in residential property.

Residential property owners, however, will pay tax on only 44 percent of the value of their property, so the city gets only 49 percent of its taxes from that sector, Drew noted.

Iseman also noted the increase of 11.4 percent in city utility rates and the significant amount of renovation and upgrading at the city water and waste-water plants. She wondered if the city was facing any federal or state environmental orders  that  would require much deeper spending in upcoming years. The city was not, Prosser and Pat Ball, the city’s utilities director, answered.

The city’s Drew noted that the city, which is self-insured, has cash on hand to cover its liability.

Iseman also asked about the city’s labor contracts. All are in the first year of three-year agreements, with wages slated to increase by 3.25 to 3.5 percent each year of the agreement, Drew said.

Prosser and Drew both noted that the tough winter has added overtime and other unexpected costs to the city’s current operating budget, but Drew noted that the city sets aside $1 million in a road-use reserve fund for just such times.

At the close of the session, Iseman said Moody’s likely would give its bond rating to the city by week’s end.

The city’s bond sale is slated for April 9.

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