Baraboo has earned a strong bond rating from an investor service that praises the city for its financial condition, but cautions against taking on additional debt.
Moody’s Investors Service assigned an Aa3 rating to the $2.1 million in bonds the city is issuing for upcoming street work. This represents a continuation of the city’s previous rating.
“That’s a very good thing,” City Administrator Ed Geick said. “The interest rates on the bonds should be good because of the city’s good financial condition.”
The recent addition of $2.1 million in debt brings the city to a total of $21.8 million.
Moody’s said the rating reflects the city’s modestly growing tax base, healthy financial operations and moderate pension burden. It also reflects the city’s high debt load.
The city’s rating could be downgraded if its debt burden rises, or if the tax base shrinks. It could be upgraded if debt levels moderate and the tax base grows.
Jim Mann of Ehlers Inc., who consults with the city about its finances, said the rating is a positive. “It’s a feather in their cap,” he said. “The city is in a strong financial position.”
Mann acknowledged the city is carrying more debt than is typical for its size. It’s taking on debt to build a city hall and police headquarters that should last 50-80 years, as well as University of Wisconsin-Baraboo/Sauk County facilities that benefit the community. “They’re making long-term investments,” he said.
The general obligation bonds issued for upcoming street work are backed by the credit and taxing power of the city. They’re issued with the belief the city will repay its debt obligation through taxation or revenue from other projects. No assets are used as collateral.