Lakewood Has 'Very Strong' Credit Position: Moody's

LAKEWOOD, OH — The city has a strong credit position, according to an annual report released by Moody's Investor Services. Lakewood currently has an Aa2 credit rating, which is slightly better than most cities in America. However, Moody's is concerned about the city's large pension liabilities and inflated debt.

The city has a "robust" financial position, Moody's said. That's in part because of Lakewood's large tax base, which is filled with "favorable" incomes. The city also has a higher-than-average cash balance as a percent of its operating revenue (51.7 percent), Moody's said. That number increased between 2012 and 2016.

“This annual review affirms all of the hard work over the past decade by city councils and the mayoral administrations to strengthen the city’s finances in a responsible and sustainable manner,” Finance Director Jennifer Pae said in a statement.

But it's not all sunshine and rainbows in the Moody's report.

"Overall, Lakewood has inflated debt and pension liabilities that are a weakness when compared to its Aa2 rating," the agency said in its report.

Moody's noted that the net direct debt to full value (2.7 percent) for Lakewood is above the U.S. median average and increased between 2012 and 2016. The pension liability to operating revenue is also much higher than the U.S. median at 3.0x.

The burden of pensions won't hit just Lakewood. In fact, Moody's thinks it could be a problem most Ohio cities will have to confront in the not-so-distant future.

"Ohio cities remain exposed to high defined benefit pension liabilities of multiple cost-sharing retirement plans, despite recently legislated pension benefit reform," the report said. "The relatively weak status of the pension plans raises the risk that the costs to local government employers could grow and pressure operating budgets."

Plus, while Moody's noted that Lakewood's tax base is "solid," the agency also said the city's economy is "relatively unfavorable" when compared to the assigned Aa2 rating. The median family income is slightly below the U.S. average, according to Moody's numbers.

The city's property tax base has not been able to recapture its 2012 and earlier levels. However, after suffering a steep drop in 2013, which persisted through 2015, the city made strides to improve the full value of its property tax base in 2016.

The whole report can be read here.

Photo from Rick Uldricks, Patch