Davenport's Credit Rating Is Put On Negative Watch - News and Weather For The Quad Cities -

Davenport's Credit Rating Is Put On Negative Watch

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Moving Rhythm City to land is going to cost the city of Davenport $46 million. It's a big risk that has creditors concerned. During Wednesday's RDA meeting TV6 learned Moody's is worried and they've issued a warning.

Moody's has given the city a double Aa2 credit rating. An Aa2 credit rating means long term there is a very low credit risk and Davenport is rated at high quality. In the short term, it means the city has the best ability to repay short term debt. However, just a few days ago Moody's also put Davenport on the negative watch list. There are several reasons, but one of the major ones is the debt the city will take when it buys Rhythm City.

"While being on a credit watch is not an assurance that bonds will be downgraded, it is a possibility," says TV6 Financial Analyst Jim Victor.

If Davenport's credit score is downgraded the city will have to pay higher interest rates.

"There will more money taken out of the city budget," adds Victor, "Therefore it will cost you and me as tax payers more money."

Moody's placing the city on negative credit watch is a signal to potential and current investors that there might be problems down the road.

"It's an early warning, it's a yellow flag for potential investors in the bonds in the city of Davenport," says Victor.

In its report issued January 22nd, Moody's lists the pending purchase of Rhythm City casino as one reason for the negative watch status. The report says the risk combined with the type of debt the city will be taking on could be a problem.

"The reason for the debt is part of it and the city operating a profit or a loss business is different than the city borrowing for the sake of building a new school," says Victor.

This is the second year in a row the city's credit rating has changed. In 2012, Moody's downgraded the city by one credit rating point. The report cites worries with the general fund balance and the city needing to diversify its revenue stream.

"The difference in the credit ratings that we're talking about is usually very small," adds Victor.

Small changes usually do not have a big impact. Victor adds the city could continue to deal with minor changes with its credit rating until we find out if the casino purchase will bring a big payout.

"Davenport could be on negative credit watch by Moody's for a long, long time," adds Victor, "There is no specific time period for when this must come to an end."

During the RDA meeting city leaders did address the credit rating issue. They say buying the casino will help the city find new revenue streams and that Dubuque and Altoona, cities that own gaming facilities, have 2 of the highest credit scores available.

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