Madison Again Receives Moody’s Investor Services Top Rating

Mayor Paul Soglin announced today that Moody’s Investor Services has again given Madison an Aaa rating with a stable outlook. This is the highest possible rating an issuer can receive. In advance of the city’s upcoming general obligation borrowing, this rating affirms Madison’s sound budget management, and conservative debt repayment structure.

Moody’s recently introduced a new, more rigorous, methodology for determining its ratings. This new methodology places more emphasis on the strength of the local economy, level of pension liabilities, and size of fund balance, among other factors. Under this new approach, two Wisconsin communities that were rated Aaa by Moody’s, New Berlin and Appleton, were placed under greater scrutiny. Appleton was eventually downgraded to Aa1 due to the relative strength of its local economy.

In advance of the city’s upcoming general obligation borrowing, this rating affirms Madison’s sound financial, budget management, and conservative debt repayment structure.

"This rating is a reflection of confidence in the management of the city’s finances, both now and in the future. I am pleased with the rating especially in light of the continued restraints the city is facing in shared revenues from the state," said Mayor Soglin. "As budget discussions continue, the city is committed to maintaining this level by enacting another responsible budget for 2015."

According to Moody’s analysts, the Aaa rating reflects the city’s large and diverse economy that benefits from significant institutional presence, sound financial operations with a history of healthy reserves, and a manageable debt burden. The stable outlook reflects the expectation that the tax base will remain a driver of the local economy. Noting the additional costs facing the city due to the excessive winter of 2013-14 and the issue of Emerald Ash Borer, analysts are confident that the city’s financial profile will remain sound.

Moody’s reported the city’s strengths as a strong and diverse economy, healthy general fund reserve levels, and rapid repayment of debt. They concluded that challenges include the strict levy limits that reduce the city’s opportunities to raise revenues.

Moody’s officials noted that a sizeable $22.7 billion tax base returned to growth mode in 2014 with a 3.9% increase and residential construction in the city has increased in the last two years leading to tax base growth. After dropping each year since 2005, the number of housing units constructed in Madison has grown annually since 2011. Given robust building permit activity and ongoing development, Moody’s expects the tax base to grow again in 2015. In addition, the city’s unemployment rate continues to trend significantly below the state and nation; in June 2014, it stood at 4.3%, below the 6.0% rate for the state and 6.3% for the U.S.