A slew of downgraded bond ratings issued by a national investment agency for Coralville last week has local city officials, an economist, and a large hotel chain at a crossroads on how to handle the city’s bloated financial future. Moody’s Investors Service, which rates the financial well-being of cities across the country, lowered a number of bond ratings for the city during a report June 7, furthering a several year pattern relating to contentious quarrels relating to financial procedures.  In the report, Moody’s said the city needs to cut its outstanding debt obligations — nearly $279 million and third highest in the state as of last June — and sell off a number of city-owned properties, including the Marriott Hotel and Conference Center, Brown Deer Golf Club, Backpocket Brewery, and the Coralville Center for the Performing Arts.

But the severity of the report and the potential repercussions depends on who you ask.

Tony Roetlin, who joined the city as finance director in December, said although Moody’s is just one metric of a city’s financial outlooks, recent outcry from the local Citizens for Responsible Growth & Taxation, along with rising TIF debt, have pushed the issue to the forefront of city discussions.

The group issued a letter Wednesday in response to the current fiscal conditions. “Coralville citizens and business owners opened up their mailboxes in recent weeks to find massive property-tax-assessment increases, which translate into increased property taxes,” it said in the release. “These increases raise troubling questions about the city’s use of taxes to finance questionable retail-development projects and renew grave concerns about the community’s increasingly perilous financial condition.”

“I don’t know if the city has developed decisions about future courses of action, but I’m confident it will be a topic of conversation, and we will develop some strategies,” Roetlin said. Moody’s outstanding credit ratings for general obligation, unlimited tax debt, for the city is now Baa2, a drop from AA in 2012 and AAA in 2011. After meeting with the city’s financial adviser following 2012’s downgrade, city officials determined that situations that Moody had spoken out against had shown “incremental improvement.” But Roetlin said he was unsure how the downgrade will affect city businesses and residents quality of life now.

“I think it’s pretty clear, [those] kinds of things are giving [Moody’s] heartburn,” he said. “It doesn’t mean [the projects] are bad things to do, it just means Moody’s sees some risk in them and is reflecting that in its rating process.”

Roetlin declined to say whether city projects that arose before his administrative term were financially necessary, adding that even if he had an issue with a particular project, his criticism wouldn’t be constructive or of any influence to city decisions.

Coralville Mayor Jim Fausett said the city made attempts in 2011 to coincide with Moody’s suggestions, but the new downgrade suggests that those attempts remain at a standstill. Following the first downgrade, he said a number of investors once interested in a Coralville presence approached him with concerns.

Nonetheless, he said, he remains confident that the city’s financial footing is improving, and if given the opportunity, he said, he didn’t think the city would forgo any of the city-owned projects.

“We think we’re on the right track,” he said. “Coralville has for some time now taken more risk than some other cities do. The council will take steps to reduce our debt as quickly and effectively as it can.”

Despite the fact that a number of prominent city projects — including Brown Deer Golf Club, the Coralville Center for the Performing Arts, and the Coralville Marriott — have lost or continue to lose money, Fausett said the city doesn’t intend on selling off any of them in the foreseeable future.

He said he remains uncertain as to whether the golf course will make any money this fiscal year.

He said that as the age of the Coralville Marriott grows, its assessed valuation has gone down, to the point that the city had to subsidize it for $800,000 a year before breaking even this year.

“If we sold the hotel, we couldn’t get back what [debt] we owe on it,” he said. I’m not even sure we would have a buyer for the hotel if we sold it.”

However, Jeff Peller, the hotel general manager, said the hotel being located on a “controversial” property in a city with rising debt has “had no effect whatsoever” on its bottom line. In fact, 2013 is the most successful year for the hotel since it opened in 2006, he said.

“Any news of what’s happened with the city of Coralville doesn’t affect the customer,” he said. “The customer really doesn’t really know, and they don’t really care about that. We’ve had only positive response from the Iowa River Landing.”

But one economist said Coralville’s situation, although typical of many municipalities, needs to be “taken to heart.”

“The bond rating tells us what the reality is, and the reality is the city of Coralville has overextended itself,” UI economics lecturer Patrick Barron said. “They should start getting rid of some of these properties or other businesses will be frightened off. 

“They have to be more fudicarily sound and more responsible to the taxpayers.”

He said existing city-owned properties need to be sold or the rising debt could “scare off” existing and potential new businesses.

“They have to reform how they are running this city,” he said. “I know all these projects are nice, but they can’t do everything. This is what happens when you try to do too much, and it’s going to hurt us. It’s happened in a lot of different communities, and it’s going to happen in Coralville.”