The credit rating agency Moody’s downgraded the City and Borough of Juneau from an Aa2 to Aa3 rating on Thursday.
“It’s like going from an A to an A-minus,” City Manager Kim Kiefer said.
However, the downgrade affects the city and borough little, Kiefer said.
Juneau gets its bonds through the Alaska Municipal Bond Bank Authority, Kiefer said. This public corporation helps Alaska municipalities finance capital improvement projects “such as schools, water and sewer systems, public buildings, harbors and docks,” according to the Authority’s web page.
“When we get our bonds through the Municipal Bond Bank, (credit agencies) look at the bond bank’s rating, not Juneau’s,” Kiefer said.
Moody’s rated Alaska’s municipal bond bank as Aa2 in April. Fitch gave the bank an AA rating with a strong outlook in April.
Standard and Poor’s ratings services gave the city an AA-minus rating in Nov. 2011. The service describes its AA rating as “very strong capacity to meet financial commitments” on its website.
Moody’s downgrade was due to the city’s “weakened financial flexibility as a result of consecutive years of draws upon reserves in the General Fund and other general operating funds,” according to Moody’s report.
Kiefer said Moody’s looked at a three-year window of Juneau’s finances to make its ratings decision. Over the past couple years, the city has had to use reserves to balance its budget, she said. However, she said, city reserves have gone up and down in the past.
“In the (three-year) snapshot it looks like at downward slope,” Kiefer said.
Kiefer said Mayor Bruce Botelho appointed a task force to look at Juneau’s reserves. It recommended the city and borough add $5.5 million to $6 million to its reserves.
“We should have two months of our expenditures in reserves,” Kiefer said. Moody’s downgrade, therefore, was consistent with the city’s own findings, Kiefer said.
“Do we like to be downgraded? No, Nobody does,” Kiefer said. “It’s not huge, but it’s not where we want to be.”
Juneau's downgrade is scheduled to be discussed at a special meeting of the City and Borough of Juneau Assembly at its chambers at 6 p.m. on Monday. For a meeting agenda, visit bit.ly/JZ8UWd.
For more on the Moody’s report, visit bit.ly/JEWILI.
• Contact reporter Russell Stigall at 523-2276 or at firstname.lastname@example.org.