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Topeka’s Credit Ratings, Bonds, and Borrowing Power (2005–2026): Impact of Leadership Turnover

Topeka transitioned to the council-manager system in 2005 amid hopes for more professional, stable administration. However, the high turnover in city managers and interims (detailed in prior timelines) coincided with a period of financial management challenges, including reliance on reserves, budget pressures, and modest economic growth. While the city’s credit ratings have remained relatively stable in the upper-medium grade range, the frequent leadership changes likely contributed to a more conservative, reactive fiscal posture that has constrained bolder long-term planning and potentially increased borrowing costs indirectly.

Credit Rating History

Topeka’s general obligation (GO) bonds — backed by the full faith and credit of the city — have generally held steady ratings:

• Moody’s Investors Service: Long-term issuer/GO rating consistently at Aa3 (upper-medium grade) in available records from the early 2010s through 2024–2026. This was affirmed in multiple bond issuances (e.g., 2020 utility bonds, 2024 reviews). Aa3 reflects a strong but not elite capacity to meet obligations, with some vulnerability to economic shifts.
• S&P Global Ratings: AA long-term rating with stable outlook for GO bonds in multiple issuances (2021, 2023, 2024, 2025). This has been consistent in rating reports, supported by very strong reserves and financial policies, though tempered by an adequate economy and weak debt position relative to revenue.
• Fitch Ratings: Limited specific mentions for the city proper, but aligned with stable investment-grade assessments.

Key observation: No major downgrades tied directly to city manager turnover appear in public records. Ratings have held despite leadership churn, thanks to strong reserve policies (e.g., targeting 15–20% unassigned fund balance), sales tax revenue stability, and conservative debt practices. However, the lack of upward movement (e.g., to Aa2 or AA+) amid national peers’ improvements may reflect the cumulative drag of inconsistency.

State-level Kansas ratings (Aa2 from Moody’s with recent positive outlook in 2026) provide a supportive backdrop, but city-specific factors dominate local borrowing.

Bond Issuances and Debt Trends (2005–2026)

• Debt Levels: Total bonded indebtedness grew from ~$298 million in 2013 to ~$524.5 million by end of 2024. GO debt (core taxpayer-backed) has fluctuated but trended downward in recent years (e.g., decreased by ~$4M or 2.9% in 2024; down significantly from peaks). Revenue bonds (utility-backed) increased more substantially.
• Major Issuances: Frequent GO and utility revenue bonds for infrastructure (streets, water/sewer upgrades, levees, etc.). Examples include 2021 refunding/improvement bonds (~$38M total), 2023-A GO bonds, 2024-A, and 2025 series. These were routinely rated AA/Aa3, allowing market access at reasonable rates.
• Debt Limits and Capacity: Kansas law caps GO debt at 30% of assessed valuation. Topeka has stayed well under this (e.g., ~27.9% usage in recent years), preserving borrowing room. Legal debt margin remains healthy.
• Borrowing Costs: Stable ratings mean competitive interest rates, but not the lowest possible. Frequent leadership transitions may have led to more refundings (to manage costs) rather than transformative projects. Short-term temporary notes have also been used for interim financing.

Impacts of the Revolving Door on Finances and Borrowing Power

The ~10–12 leadership transitions since 2005 (5 permanents + multiple interims) created measurable drags:

• Disrupted Planning and Institutional Knowledge: New managers (and interims) require time to assess finances, often leading to short-term budgeting. This contributed to patterns of drawing down reserves for operating deficits (e.g., projected $15M+ gaps in 2027 discussions) rather than structural reforms. Long-term capital plans (5-year CIP) exist but face execution risks with each change.
• Reactive vs. Proactive Management: Firings/resignations (e.g., terminations of Bonaparte and Wade) create uncertainty. Rating agencies note strong policies but highlight adequate (not exceptional) budgetary performance and economic base. Turnover likely amplified reliance on one-time fixes, reserves, and sales tax (vulnerable to economic cycles).
• Staff and Morale Effects: Repeated onboarding erodes expertise in finance departments, potentially leading to higher internal costs or missed efficiencies. This indirectly weakens credit narratives around "very strong" management.
• Borrowing Power Outcomes:
  • Not Weaker Overall: Access to markets remains solid; no defaults or near-misses. Debt service coverage stays satisfactory.
  • Opportunity Cost: Stable but not upgraded ratings mean slightly higher interest costs than top-tier peers. Inability to pursue more aggressive growth-oriented debt (e.g., for major economic development) due to perceived instability may have limited diversification beyond government/services.
  • Current Strain: Recent budgets show pressure — using reserves, personnel costs rising, revenue lagging in some projections. This echoes national findings that high municipal turnover correlates with weaker long-term fiscal outcomes.

No Bright Spots in This Context: While ratings held, the "consistently inconsistent" leadership has reinforced stagnation. A more stable executive team could have built stronger reserves, diversified revenue, or executed visionary infrastructure/economic plans to boost the tax base and ratings. Instead, Topeka maintains a solid-but-not-outstanding profile — adequate for survival but insufficient for breaking out of slow-growth patterns.

In summary, turnover has not caused a credit crisis but has contributed to a ceiling on potential. Borrowing power is intact yet underutilized for transformative change. For the absolute latest, review the City’s most recent ACFR or rating reports on EMMA (MSRB)