Moody’s Investors Services announced Oct. 17 that three of Carmel’s outstanding lease bonds will be downgraded by the rating agency. The action concludes a review undertaken in conjunction with the July 2016 publication of new standards for rating lease bonds by Moody’s.

Hundreds of bonds are affected nationwide because of a change in rating methodology, including nearly 80 municipal and government bonds in Indiana.

At the same time, Moody’s upgraded the city’s county option income tax bond rating while downgrading the lease risk, which involves leasing a project between the city and another city entity.

One of the bonds that will carry the lowered Moody’s rating is the Lease Rental Revenue Bonds of 2005, which helped fund The Center for the Performing Arts and includes The Palladium. Part of the reason for the downgrade is because Moody’s said The Palladium is “less essential to municipal operations.”

Loren Matthes, a principal at H.J. Umbaugh and Associates, which provides financial advice to the City of Carmel, said the downgrade has nothing to do with Carmel’s credit. She said Moody’s doesn’t like the risk associated with “lease debt.”

“All Indiana lease bonds received a downgrade due to Moody’s new rating criteria and ‘newly’ perceived risk of ‘lease’ debt,” she said.

One non-lease bonds issue received an upgrade because the County Option Income Tax rating went up and it is not a lease bond.

Matthes added that Standard and Poor’s Global Ratings continue to rate Carmel property tax debt “AA+” and COIT debt “AA.”

Matthes noted that the rating change cannot change the interest rates on the bonds.

“The bond interest rates were fixed at the time of bond issuance,” she said. “A rating change could only affect the trading of the bonds in the secondary market, which does not affect Carmel.”