However, the negative outlook stems from three conditions that could move the rating down in the future. These include increases in debt levels, weakening of the city’s tax base and material declines in operating reserves and liquidity, including the financial conditions of the Madison Water Utility.
“General operations of the city remain exposed to its water enterprise,” the report from Moody’s said.
Last April, an audit revealed the Water Utility faced a $6 million deficit. The Public Service Commission granted the utility a 30.6% rate increase in November 2018 while reprimanding its fiscal practices.
The rate increase was meant to let the utility borrow for 2018 to cover capital expenses for 2017, 2018 and 2019 and repay the city a $6 million loan.
According to the report, the rate increase should strengthen water operations but “any challenges to water operations requiring general fund support could potentially place downward pressure on the city’s credit profile.”
Moody’s downgraded the taxpayer supported Madison School’s debt in 2016. Debt ratings are a factor in borrowing costs.
Madison taxpayers have long spent more than most K-12 school districts.