November 21, 2024

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Chattanooga, Tennessee, downgraded to AA-plus by Fitch

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Chattanooga, Tennessee, downgraded to AA-plus by Fitch

Chattanooga, Tennessee’s issuer default rating and general obligation rating were downgraded to AA-plus by Fitch Ratings. The outlook is stable.

Fitch explained the downgrade, which stemmed from the implementation of Fitch’s revised local government rating criteria, by citing a weak population trend and midrange demographic and economic level metrics.

The city had $351 million in debt, excluding debt serviced by special debt streams, as of June 30, 2023, according to its fiscal 2023 annual comprehensive financial report.

Chattanooga Mayor Tim Kelly has maintained substantial budget reserves, a credit strength for the city, Fitch said.

The city’s population has grown on average 0.7% per year over the last 10 years. The city’s median household income is 82% of the Fitch’s portfolio median. Its unemployment rate is equal to the national unemployment rate.

“Chattanooga’s liabilities to governmental revenue have improved while carrying costs to governmental expenditures remain moderately weak and liabilities to personal income remain midrange,” Fitch said.

The city’s budget reserves are at 40% of spending levels.

The city serves as a regional economic center of a six-county area of over 500,000 people, Fitch said. It has sizable manufacturing companies, including Volkswagen and Amazon.

S&P Global Ratings rates the city’s GOs AAA with a stable outlook.

It cited the growing regional economy and the city’s strong financial position, supportive financial management practices and policies, and comparatively low debt burden.

“AA-plus is an excellent rating and we are still rated AAA by S&P,” said Chattanooga Mayor Tim Kelly. “Thanks to years of responsible, conservative budgeting, city government is in very strong financial shape.”