By Melanie Williamson
Since Amy Hendricks took the position of finance director for the city of Vermilion in early 2018, she has faced an uphill battle sorting out the city’s complicated financial situation. One of the many steps she has taken is to look at options in restructure the city’s debt in order to pay down the debt while also freeing up money on the city’s budget for needed projects.
An important step in debt restructuring for a city is the Moody’s Investors Service rating. This rating is based on many factors and is used to determine the risk for investors and lenders in restructuring plans. Henricks explained, “Just like your credit score at home, the rating from a credit agency is what determines the City’s ability to borrow money, refinance existing debt at better terms as well as making purchasing of our bonds more attractive to investors in the market.”
According to the Moody’s report delivered to the city following their evaluation, “Moody’s Investors Service has upgraded the City of Vermilion, OH’s issuer rating and rating on outstanding general obligation limited tax (GOLT) debt to A1 from A2. Concurrently, Moody’s assigns an A1 rating to the city’s $4.1 million General Obligation (Limited Tax) Various Purpose Improvement and Refunding Bonds, Series 2018. The city’s issuer rating is equivalent to the rating we would assign to bonds secured by the city’s general obligation unlimited tax (GOULT) pledge and is used as a reference rating for the GOLT debt. This rating action affects $12 million of debt.”
The report goes on to explain, “The upgrade of the city’s issuer rating to A1 reflects its modestly sized though largely stable tax base with average resident income levels, maintenance of healthy fund balance and a moderating debt burden. The rating also incorporates the city’s elevated pension burden and historically weak though improving enterprise operations. The lack of rating distinction between the city’s issuer and GOLT ratings reflects the city’s full faith and credit pledge on the payment of GOLT debt.”
In response to the report, Hendricks made the following statement, ““After receiving rating downgrades from Moody’ Investors Services in 2010 and 2012, we all knew this review was a critical piece in the City’s long term financial planning…To receive an upgrade to A1 at this time is solid recognition of the hard work that has been done in 2018 by the administrative team. However, this doesn’t mean that we are done! We are continuing to evaluate what we do every day to strengthen Vermilion’s financial outlook.” With the Moody rating completed, Hendricks will move forward with the administration’s plans for restructuring.