Moody’s Investors Service upgraded the city of Jacksonville’s issuer credit rating, citing an expanding tax base and financially outperforming peer cities during the coronavirus pandemic.
The New York City-based rating agency announced the upgrade to Aa2 from Aa3 in a report and news release May 11.
Moody’s Aa2 rating is the third-highest in its 10-level scale. The agency’s rating chart shows an entity with an Aa rating means its debt and financial obligations are “judged to be of high quality and are subject to very low credit risk.”
Diversity in Jacksonville’s local economy also was a factor.
The rating agency also upgraded the city’s transportation and Better Jacksonville Plan sales tax bonds to Aa3 because of “a strong recovery from the impacts of coronavirus and adequate legal provisions.”
Higher credit rating agency scores can mean lower borrowing costs from lower interest rates.
“These upgrades are a recognition of the incredible strength of the Jacksonville economy and the disciplined approach to fiscal governance we have exhibited since taking office,” Mayor Lenny Curry said in a news release May 12.
The city has reduced its debt by about $585 million and added more than $155 million to its reserves since 2015. The Curry administration attributed that to pension reform and the ½-cent sales tax used to pay down the city’s pension debt.
Moody’s cited the closing of three pension plans to new employees as a factor for the rating improvement along with others:
• Material improvement in the city’s cash and liquidity position (issuer and non-ad valorem ratings.)
• Significant reduction in the growth of the city’s pension obligations (issuer and non-ad valorem ratings).
• Material economic improvement reflected in tax base growth, lower unemployment and increased median family income (issuer and non-ad valorem ratings).
• Improved coverage from pledged revenues (special tax ratings).