Fargo finance committee hears Moody's downgrade, staff outlines fund-balance roadmap to blunt negative outlook

Summary

City staff and a municipal advisor explained a Moody's downgrade and a negative outlook, outlined how fund-balance ratios and enterprise debt influence ratings, and proposed a draft fund-balance policy and several levers (asset sales, modest rate increases, accounting adjustments) to rebuild reserves and avoid further downgrades.

At a Fargo finance committee meeting, staff and the city's municipal advisor outlined why Moody's Investor Services downgraded the city's credit from Aa2 to Aa3 and placed it on negative outlook, and presented options to improve fund-balance ratios and reduce the chance of additional negative rating actions.

Steve Scharf, director at Baker Tilly's municipal advisory practice, told the committee Moody's has revised its methodology to take a more holistic view of issuers and now factors enterprise and utility funds more directly into credit assessments. "The city did receive a downgrade from Moody's investor services," Scharf said, and he stressed Moody's focus on fund-balance ratios and leverage as primary drivers of rating action.

That change means the city's investments in utilities and regional services are considered alongside general-fund metrics. Mayor Mahoney asked why Moody's…

Fargo finance committee hears Moody's downgrade, staff outlines fund-balance roadmap to blunt negative outlook

Summary

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