Moody’s Affirms Rating on City of Hamilton General Obligation Debt

On April 30, 2015, Moody’s Investor Service affirmed the Aa3 rating on the City of Hamilton’s $22 million in outstanding general obligation limited tax (GOLT) debt.  Moody’s confirmed that the outlook for the City of Hamilton is likely to remain stable, in the medium term.

According to the Rating Update, provided by Moody’s, “The Aa3 rating reflects the city’s moderately-sized tax base located in Butler County (Aa2) between the Cincinnati (Aa2 negative) and Dayton (Aa2 stable) metro areas; below average socioeconomic profile; satisfactory financial operations; manageable debt levels with significant exposure to variable rate and short-term debt; and exposure to two underfunded statewide cost-sharing pension plans.”

Joshua Smith, Hamilton City Manager, stated the following, in response to the Moody’s rating affirmation, “Moody’s affirmation of our Aa3 rating is great news for the City and its General Fund.  This rating confirms that the City’s approach to the budgeting, managing and operating of our general fund is fiscally responsible and prudent, making it attractive to bond buyers.  This is a testament to City Council, City Administration and all of the outstanding and dedicated employees of the City.”

Moody’s noted the following as Strengths and Challenges for the City:

  • Strength – “Favorable location between Cincinnati and Dayton.”
  • Challenge – “Reliance on economically-sensitive income tax revenues.”
  • Challenge – “Elevated debt burden attributable to overlapping local governments.”

Moody’s noted that there were actions or conditions that could make this current rating either go up or down:

  • “Significant expansion of the city’s tax base and/or strengthening of demographic profile.” (UP)
  • “Material increases in operating fund reserves.” (UP)
  • “Weakening of the city’s tax base and/or demographic profile.” (DOWN)
  • “Material declines in General Fund financial reserves and/or economically sensitive revenues.” (DOWN)
  • “Substantial increases in city’s debt burden.” (DOWN)

The Rating Update continued, “We expect the city’s General Fund reserves to decline modestly in the near-term, but remain satisfactory due to the creation of an Economic Budget Stabilization Fund and the city’s history of implementing expenditure reductions and revenue enhancements when necessary.”

Tom Vanderhorst, Hamilton Director of Finance stated, “We are extremely pleased with the Aa3 rating from Moody’s.  Moody’s noted the potential growth in our tax base from previously announced projects, such as the significant expansion of ThyssenKrupp Bilstein of America, once that project is completed later in 2015.  We are also excited about the potential for growth in tax revenues from recently announced new projects, such as iMFLUX and StarTek, which were not mentioned by Moody’s, but could have impacts similar to Bilstein.”

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