The Debt Management Division is responsible for the review and analysis of the City's outstanding debt obligations. This includes analyzing where borrowing funds would be in the City's best interest, monitoring the City's debt limits, and assessing the terms of outstanding debt and refinancing the debt would be to the City's advantage.
Moody's Investors Service's Credit Rating for the City of Berea
The City obtains a credit rating from Moody's Investors Services, LLC when the City is looking to borrow long-term debt. The most recent Moody's report was received in March 2011. The City's Aa2 bond rating was affirmed or maintained and the City obtained a MIG-1 rating on its issuance.
Moody’s Aa bond rating indicates that issuers or issues demonstrate very strong creditworthiness relative to other US municipal or tax exempt issuers or issues.
MIG-1 Rating - The MIG-1 rating is based on expected market access for refinancing, a history of successful marketing of notes and bonds and the credit quality reflected in the City's Aa2 underlying rating. The City's long-term Aa2 rating is based on the City's moderately sized suburban tax base; satisfactory financial operations; and manageable debt profile.
One of the City's strengths include stable financial operations supported by healthy General Fund reserves.
The Moody's report states as positive points for consideration for the City's rating to include:
- "…history of positive budget variances and prudent management."
- "At the close of fiscal 2009, the city's General Fund Balance (GAAP basis) was $3.6 million, or a satisfactory 22.5% of revenues..."
- "debt profile is expected to remain manageable…The City's overall 2.1% debt burden is below average compared to state and national medians."
- "...favorable opportunities for both new development as well as redevelopment of exisiting properties."
- " …year end 2009 GAAP basis General Fund balance and cash balance well exceed the city's adopted fund balance policy…"
- "...City of Berea has available land for future development."
- "…completion of the railroad overpass project that has opened up tracts of land favorably located near the Cleveland Browns Football franchise training facility."
- "…city also benefits from the presence of Baldwin-Wallace College."
Types of Debt Obligations
The City maintains several types of debt. These include:
Bond Anticipation Notes - Bond anticipation notes are short-term debt obligations for a period of one year or less. The notes may be paid off at maturity but more commonly renewed or rolled over at the same or a reduced value upon maturity.
General Obligation Bonds - General obligation bonds are direct obligations of the City for which its full faith and credit are pledged for repayment. The general obligation or GO bonds will be retired from the general obligation debt service fund. The GO bonds are to rbe repaid from both voted and unvoted property tax levied on all taxable property located within the City, municipal income taxes, and transfers from the Water Revenue Fund for exempt properties. Exempt properties include organizations exempt from taxation, such as colleges and churches, as well as property outside the City's jursidiction who are provided water services from the City. The City assesses these exempt properties through a surcharge on their water bill to pay for the debt.
Urban Renewal Bonds - Urban renewal bonds are direct obligations of the City for which its full faith and credit are pledged for repayment. Urban renewal bonds are to be repaid from property taxes approved for that purpose, and will be retired from the general obligation debt service fund.
Loans - The City has several loans with various agencies. The Ohio Water Development Agency loans funds to municipalities for water and sewer related projects. The Ohio Public Worksd Commission offers zero percent loans for several City projects. The City also entered into an agreement with the City of Olmsted Falls, Ohio for a joint construction project on Lindberg/Westlawn Road. The City has agreed to make annual debt service payments to the City of Olmsted Falls who were the lead City on the project.
The loans stated above will be repaid from user fees, voted property taxes and municipal income taxes.
Capital Leases - The City is obligated under certain lease agreements. The leased assets and related obligations are long-term agreement leases.