Coralville is getting a low grade because of all the debt it has taken on. The S&P financial agency recently lowered its bond rating to what's called "non-investment grade."
The lowered rating is because of big projects like the multi-million dollar arena Coralville is building, along with the city's ownership of the Marriott Hotel and Conference Center.
A financial expert said people living in Coralville could potentially have to pay more in property taxes if the city has to refinance its debt.
The $70 million arena is a big risk the city says will be an even bigger payoff. But the agency that gives out the rating, which is similar to a credit score for people, shows the city has bitten off so much debt that it's on shaky financial ground.
The Standard and Poor's ratings go from AAA, which is terrific, all the way down to D which means bills are bouncing and things are bad. Coralville's rating was at a BBB+ and now, it's at a BB+.
"If they want to go to the bond market to borrow more money or to refinance the existing debt they have, with a non-investment grade rating, you're going to pay more in interests costs," said Tory Meiborg, the president of World Trend Financial.
City Administrator Kelly Hayworth said the rating drop is disappointing, but building the arena makes sense because it will strengthen the local economy, and that project is financially sound.
"We're going to be careful and cautious moving forward to make sure that we implement the project under budget and on time. So those are two critical components," Hayworth said.
He said the city will be able to pay back its debt.
The arena is set to open in the fall of 2020.