Bond rating downgraded for Wadena
Moody's Investors Service has downgraded the bond rating for the City of Wadena from an A1 to an A2 grade, citing what it calls a limited tax base affected by the 2010 tornado, lower income levels and the fact that certain large FEMA reimbursements to the city are still pending.
The rating applies to the city's general obligation debt, which Moody's spokesman David Jacobson defined as the most common type of municipal bond.
"All it means is that the town promises to repay this bond because it is backed by the taxing power of the town," Jacobson said.
City Administrator Brad Swenson did not take issue with the lowered rating. He said the city still falls within Moody's overall debt category of "Prime-1." Although the downgrade might possibly affect the interest rates the city pays the next time it sells bonds, the city would get another rating then, which might see an improved grade, he said.
"Our bond rating is right up there. We don't have anything to feel bad about," Swenson said. "Right now, I don't know that this is going to have any effect on us cost-wise."
Swenson also said the rating could be used as an effective tool to think about ways of improving the city in the future. He said factors that may lead to getting a higher rating later on include rebuilding the city's reserve fund, nailing down questions over the Wellness Center's operating cost and taking care of deferred assessments.
City Finance Officer Lloyd Lanz said one of the reasons the city was downgraded in the first place was the fact it's still waiting on FEMA to reimburse about $1 million the city paid out. Lanz said FEMA has already given that money for the state of Minnesota to pass on to Wadena. However, Lanz said the state emergency management workers that would have helped process the money were likely diverted during the period of severe flooding in Duluth, causing a delay in the reimbursement.
Lanz was confident the rating would eventually go back up.
"I think that as the economy improves and we get farther away from the tornado, they're going to bump us back up to where we were before," Lanz said.