The city of Roseburg is on sound financial footing, but has a “somewhat elevated” debt associated with its pension commitments, according to a well-regarded investor service.
Moody’s Investor Service, which is considered a leading provider of credit ratings for public finance issuers, recently issued its annual comment on the city and confirmed its credit rating for the city as an Aa3.
An ‘Aa’ rating signifies that obligations of the entity are judged to be of high quality and are subject to very low credit risk. In its annual statement, Moody’s said that “Roseburg’s credit position is good and its Aa3 rating is equivalent to the U.S. cities median of Aa3. The notable credit factors include a healthy financial position, a small debt burden, a somewhat elevated pension liability, a sizeable tax base with a solid wealth and income profile.”
The city has had the Aa3 rating for about three years now, said Eric Johnson, a city spokesman. Moody’s upgraded Roseburg’s rating from an “A1” to an “Aa3” in the spring of 2017, he said.
“Basically, to explain it in laymen’s terms, it’s like a credit score for companies,” Johnson said. “A high rating means that a company is able to meet its financial obligations, and has the ability to pay them in a timely manner. A company with a low rating, on the other hand, is considered a high risk, and is less likely to meet its debt obligations. Low rating organizations are more likely to go into default and suffer financial loss.”
In terms of finances, debt and pensions, and the economy and tax base, Moody’s determined the following:
Roseburg has a healthy financial position, which is in line with the Aa3 rating. The city’s cash balance as a percent of operating revenues is just below the national median but grew between 2014 and 2018. In addition, the fund balance is a percent of operating revenues (31.1%) is about the same as the national median.
Debt and Pensions
The debt burden of Roseburg is light and favorable with respect to its Aa3 rating. The net direct debt to full value (0.2%) is below the Moody’s-rated cities nationwide. That said, the pension liability of Roseburg is somewhat inflated and is a weakness relative to the assigned Aa3. The Moody’s-adjusted net pension liability to operating revenues (3.1x) is much higher than the U.S. median.
Economy and Tax Base
The economy and tax base of the city are solid and are comparable to its Aa3 rating. Roseburg’s full value per capita ($119,891) is slightly above the U.S. median and was flat between 2014 and 2018. Moreover, the total full value ($2.9 billion) is above the U.S. median. Lastly, the median family income is 91% of the national level.
The ”somewhat elevated pension liability” refers to the city’s Oregon Public Employee Retirement System obligations. Such a debt burden is not unique to Roseburg, Johnson said.
“City and county governments all over Oregon are experiencing the same situation. It is not exclusive to the city of Roseburg,” he said. “The PERS rates are determined at the state level, and we are required to pay into the system just like every other government organization. In the past several years, these rates have changed.”
“At this time, the city budget is currently able to meet its PERS obligations,” Johnson continued. “We actually have a city policy that requires us to maintain an ‘A’ rating with Moody’s. In order to maintain that rating, we must continue to fulfill all of our debt obligations, including PERS. But we also understand that this is a long-term, state-wide issue that needs to be addressed.”