Evanston will maintain maximum borrowing power for city projects in 2003, thanks to the city’s latest rating from Moody’s Investor’s Service.
Moody’s gave Evanston its highest possible score, a AAA bond credit rating, and cited Northwestern as a positive factor. The rating allows the city to borrow more money than other cities and accumulate less debt over time, said John Peterson, a principal in the public finance division of the city’s investment banker, Legg Mason Wood Walker.
“It’s been a long-standing and well-deserved assessment of the city’s credit profile,” Peterson said. “It accurately reflects the outstanding quality of credit of the city of Evanston and has for more than a decade.”
The city was the first in Illinois to receive the AAA rating and has sustained its status since 1986.
The Moody’s report attributed the credit rating decision to a resilient local economy “anchored by the presence of NU and sections of extremely high-end housing stock.”
The city’s stable finances and diverse revenue sources were also factors.
Troy Thiel, president of the Evanston Small Business Association, said NU students help propel the growth of developments downtown, and the university stabilizes the job market. Thiel called NU an “economic engine among the business community that surrounds it.”
NU helps sustain Evanston’s economy even in the summer, said Dick Peach, president-elect of the Chamber of Commerce.
“We don’t become a ghost town during the summer,” Peach said. “The university population in the downtown business area stays fairly consistent all year.”
Eugene Sunshine, NU’s senior vice president for business and finance, said university employees support Evanston’s housing market because half of them choose to live in the city. Sunshine also said the university has shored up the city’s suffering office space market.
The city continues to produce unique entrepreneurial businesses in an increasingly homogenous economy, Thiel said.
“People are drawn to the unique more than the common,” Thiel said. “Historically, Evanston was kind of a more liberal community than many of its neighbors and attracted people who were more artistic or more entrepreneurial.”
Thiel said new businesses looking to settle in Evanston see the credit rating as an indicator of potential growth. This may help to off-set the city’s relatively high tax burden, he said.
If Evanston wants to keep the benefits of a high credit rating, it should maintain its strong financial management, Peterson said. He said that means building cash balances, constraining its borrowing requirements and developing long-range plans for the future.
“The short answer is the city should continue to do what it’s been doing,” he said.
The worst thing for the credit rating is overspending, Peterson said.
But Thiel warned that Evanston also needs to address its “systemic crisis of budget deficits.”
Evanston City Council curently faces a budget deficit of about $3.5 million and has until the end of February to fix it. Last year aldermen faced a similar situation.
“The current way of solving it is increasing taxes and reducing services,” Thiel said. “That will impair business and residential demand.”
Peach said that even if Evanston’s economic growth slows, its top credit rating won’t evaporate.
“There would have to be some real economic catastrophe,” Peach said. “Your credit ratings don’t just disappear overnight.”
