Moody's Reaffirms Lakewood's Credit Rating

LAKEWOOD, OH — Moody's has reaffirmed the City of Lakewood's Aa2 credit rating for its 2019 Debt Issuance. The credit rating firm said the city's reaffirmation was a reflection of its strong financial position.

"While the city is experiencing steady population declines, the loss is reflective of shrinking family sizes as opposed to significant net migration loss. Demand for Lakewood real estate continues to push down residential vacancy rates and drive increases in property values," Moody's wrote of the city's current status.

Moody's further noted that Lakewood has a "strong" financial position thanks to "balanced operations, healthy reserves, and adequate revenue raising ability." However, the company thinks Lakewood's biggest challenge will be above average debt and pension burdens.

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The city faces growing debt primarily because of its significant water and sewer capital needs. Lakewood is implementing a five-year rate plan designed to fund improvements to the city's water and sewer infrastructure. That plan will increase residents' bills each year, so a typical resident's bill of six cubic feet of water per month will jump from $81.49 in 2018 to $87.82 in 2019.

The other obstacle facing Lakewood financially is more difficult to address. Moody's said the city's exposure to "underfunded state retirement plans" (particularly the Ohio Police and Fire Retirement System) is a major challenge for Lakewood's future.

Moody's said it does not issue a ratings outlook for cities with this much debt. The company did say that Lakewood could improve its financial outlook by reducing its debt burden or growing its tax base. However, the rating could be downgraded if the debt burden continues to grow unabated, or if the city's reserves are reduced.

The entire Moody's report was shared online.