Moody’s Assigns Aa2 to Twinsburg
Removes Negative Outlook
The City of Twinsburg has been advised that Moody’s Investors Service has made a positive change in the City’s bond rating. Twinsburg will maintain its Aa2 rating, but Moody’s has removed the “negative outlook” that was added in 2018.
On October 8th a Moody’s senior analyst conducted an in-depth assessment wherein the Mayor, President of Council and City administrators provided detailed answers regarding Twinsburg’s financial position, economic outlook, city services and amenities, and other issues that could positively or negatively impact the City as a whole.
Moody’s Credit Opinion highlights the following factors that led to the removal of Twinsburg’s negative outlook.
- Twinsburg has solid credit quality
- Industry that drives the local economy
- Cash and fund balances are strong, despite declines in recent years
- City’s return to balanced operations in fiscal 2019
- Continued balanced performance through fiscal 2020
- City’s debt burden is relatively low
Over the past several years, through the concerted effort of the Mayor, City Council, Department Heads and employees, the City has been able to stabilize its General Fund balance. In 2020, COVID-19 has caused a $1.8 million decrease in income tax revenue. Despite this reduction in revenue, the City was able to stabilize its reserve balances by further reducing its operating expenses, delaying capital projects and reducing staff by 10%.
The Credit Opinion also addressed negative factors that could lead to a future ratings downgrade.
- City’s adjusted pension burden is above average
- Trend of declining reserves is likely to continue
- City’s high reliance on economically sensitive income tax revenue
- Continued exposure to underfunded pension plans
During the ratings assessment, Moody’s focused on Council’s approval of 2.4 mills to fund police/fire pensions and safety force capital. This action was viewed positively inasmuch as it specifically addresses all of the negative factors set forth above. However, the analyst also addressed the negative impact Issue 24 could have on the City’s overall credit profile and the downgrading influence it could have on future bond ratings. The analyst highlights the fact that the City “would not levy the additional millage for pensions” if Issue 24 passed. Preservation of the unused Charter millage would be prudent to assist in maintaining the City’s financial profile and flexibility.
Overall, the City is pleased with the continuance of the Aa2 rating and shares Moody’s optimism about Twinsburg’s financial future with the removal of the “negative outlook.”