RALSTON, Neb. — A financial ratings agency has downgraded the debt of an arena in Ralston, citing weak management by the city.
The Omaha World-Herald (http://bit.ly/2db8lkz ) reports that Standard and Poor lowered Ralston Arena’s bonds from an A+ to a BB. The agency said Tuesday that the rating could fall again if a 2016 audit shows more financial problems.
S&P says the city is in a weaker financial position because of the underperforming arena, which has struggled due to competition since it opened in 2012.
“We view the city’s management as weak,” the firm said in its report.
Report author Blake Yocom also said the city suffers from continuing inaccurate assumptions in its budgets, incomplete monthly finance reports and a lack of long-term financial planning.
Ralston Mayor Don Groesser says the downgrade is unwarranted and that the arena has gone from operating at a loss to profit this year. He also said Yocom never asked for the city’s long-term financial plans.
At Ralston’s City Council meeting Tuesday evening, Groesser said the arena is “doing a great job,” and everything is going according to the city’s plan. Groesser told the council the city is working to change the rating.
The ratings drop puts the arena’s debt in “speculative” territory, also known as “junk.” Many money managers and other investment professionals won’t buy debt that is rated in “junk” territory by ratings firms. Such debt also commands higher interest rates.
The arena’s debt has already been sold, but the rating could increase interest rates on any future bonds issued by the city.
Craig Maher is director of the Nebraska State and Local Finance Lab at the University of Nebraska at Omaha. Maher says a municipal rating that poor is extremely rare.
“The fact that they are in this position is not going to bode well,” he said.
Information from: Omaha World-Herald, http://www.omaha.com