Davenport’s proposed casino acquisition was among the reasons Moody’s Investors Service gave the city a negative outlook on its Aa2 bond rating.

City officials met with Moody’s representatives earlier this month, and the rating was released by the company last week. Although the outlook was revised as negative, the city’s overall rating remained the same.

The bond rating was raised at an issue at Wednesday’s Riverboat Development Authority meeting regarding the city’s proposed purchase of the Rhythm City Casino.

Although Moody’s saw the city’s large and stable tax base as a strength, it raised concerns about the city’s limited cash position and “new risks posed by expected future ownership of a casino.”

“Combined, these two characteristics weaken the city’s overall credit profile relative to other similarly rated entities,” the Moody’s rating states. “Furthermore, purchase and ownership of the casino is expected to increase the city’s debt burden, either directly through the issuance of general obligation bonds or through the inception of a lease agreement.”

Alderman Jeff Justin said that the rating agency also raises concerns about a lack of revenue diversity and that the casino would help remedy that.

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“I wouldn’t risk taxpayer money if I thought there was a risk,” Justin said.

City Administrator Craig Malin said the city has explored the risk through “considerable due diligence.” He told the RDA that Polk County and the city of Dubuque both own casinos and have a better bond rating than Davenport.

Better financial liquidity, likely boosted by casino revenue, would likely remove the negative outlook, according to the rating agency.

“Removal of the negative outlook will likely follow restoration of unrestricted liquidity within the general fund, which would further mitigate risks associated with casino ownership,” the rating announcement states.