CHICAGO (Standard & Poor's) Dec. 17, 2013--Standard & Poor's Ratings Services said said that it lowered its issuer credit rating (ICR) to 'AA' from 'AAA' on Indianapolis, Ind., based on our recently released local general obligation (GO) criteria. At the same time, Standard & Poor's lowered its ratings on the city's GO and ad-valorem property tax-backed debt to 'AA' from 'AAA', certificates of participation (COPs) to 'AA-' from 'AA+', and moral obligation-backed debt to 'A' from 'AA'. The outlook on all debt is stable. The 'AA' ratings are based on ad-valorem property tax pledges, subject to state circuit-breaker legislation. The 'AA-' rating on the COPs reflects annual appropriation risk, and the 'A' rating on the moral obligation debt is based on the city's moral obligation pledge to replenish debt service reserve funds, if needed, subject to council appropriation. Standard & Poor's also lowered its long-term rating to 'AA-' from 'AA' on certain moral obligation debt, reflecting the rating on the insurance provider (Assured Guaranty Municipal Corp.) now being higher than the underlying rating. "The 'AA' rating and stable outlook reflect our assessment of Indianapolis' very strong budget flexibility and liquidity," said Standard & Poor' credit analyst John Sauter, "along with its strong management." Another supporting factor is its adequate economy. Offsetting factors include the city's:
Weak budgetary performance, factoring in forecasted deficits for fiscal years 2013 and 2014; and
Weak debt and contingent liabilities position, mostly reflecting high direct debt.
"We do not anticipate any of the positive factors wavering within the two-year outlook period," added Mr. Sauter.
Rating improvement is likely contingent on an improved management score and more balanced budgetary performance in the near term (compared to projections), particularly given we do not anticipate the debt and contingent liability assessment or economy assessment to improve in the near term. Should the management and budgetary performance assessments improve, a higher rating would be likely.Hmm. "mostly reflecting high direct debt". The Ballard administration will be adding more and more debt as fast as it can and as much as it can before they are out of office. Maybe its time the Council reflect on this high debt load and make Ballard pay off some before he hands the next generation more.