ST. LOUIS _ Moody's Investors Service has once again downgraded St. Louis' credit rating.
St. Louis' general-obligation rating fell from A3 to Baa1 on Wednesday, and ratings on revenue bonds also were downgraded. Obligations rated Baa are subject to moderate credit risk, which could mean higher borrowing costs for the city.
It's the latest in a troubling trend: Moody's has cut the city's rating four times in less than three years, with drops in August 2015, October 2016 and March 2017.
The agency attributed the city's latest downgrade in part to its "weakened reserve position, which will remain challenged over the near term despite recent revenue enhancements and policy changes that seek to rebuild narrow reserves."
The city sets aside a certain amount of money in case it needs to weather an economic downturn. The reserve target is at minimum 5 percent of the St. Louis budget, currently $25.8 million, but the existing reserves haven't recovered from the 2008 recession, leaving only a balance of roughly $16.5 million.
Other factors Moody's considered include a reliance on "economically sensitive revenue streams," elevated debt and mounting pension costs.
Moody's did revise the city's financial outlook to "stable," citing a recent vote by top city officials to dedicate 1.5 percent of annual payroll expenditures to bolstering the city's savings.
But Comptroller Darlene Green said the downgrade should serve as a "wake-up call" to city leaders as they consider tax incentives for developers going forward.
"This downgrade should be unacceptable to all St. Louisans. And what is most disappointing is that it did not have to happen," Green said in a statement. "Moody's warned us in March 2017 that we cannot continue increasing the city's general fund debt for nonessentials. Then, I immediately warned city leaders that we could not fund nonessential projects like the renovation of Scottrade Center without a negative consequence. Yet other city leaders did not collaborate on an alternate financing structure."
Green had initially refused to sign a financial agreement that funded the city's commitment to renovations of Scottrade Center, home of the St. Louis Blues, because she said it would hurt the city's credit rating. Kiel Center Partners, the group that owns the Blues, filed a lawsuit that was eventually settled in January.
A spokesman for Mayor Lyda Krewson could not immediately provide a comment on the downgrade.
The new rating comes as the St. Louis Board of Aldermen begins the process of reviewing the fiscal 2019 budget, which contains cuts to make up for an estimated $10 million shortfall.
Additionally, a bond issue will go before St. Louis voters in August, when they'll decide if the city should borrow about $50 million for new equipment for the fire department, bridge repairs, and renovations to city-owned buildings such as City Hall, courthouses and correctional facilities. That includes the installation of permanent air conditioning for the the City Workhouse.
