City of Omaha's bond rating downgraded; pension concerns cited - Omaha.com
Published Friday, September 13, 2013 at 12:00 am / Updated at 6:35 pm
City of Omaha's bond rating downgraded; pension concerns cited

Mayor Stothert said Friday that Moody's bonding agency will maintain the City of Omaha's AA1 bond rating set last year.

She commented the day after Standard & Poor's Rating Services, another major bonding agency, announced it was downgrading the city's rating by one notch, from AAA to AA+.

Stothert said ratings agencies are getting tough on cities with unfunded pensions. Three percent of cities have AAA, and they do not have unfunded pensions.

"I really hope this is a wake-up call to our unions as we continue to negotiate their contracts," she said.

Stothert said it will take time to resolve the city's unfunded liability, which stands at about $700 million.

Standard & Poor's noted that the city had "strong budgetary performance" and had done a good job of maintaining cash levels to cover debt service and expenditures.

It also said, however, that Omaha has a "very weak debt and contingent liabilities position, reflecting the city's high net direct debt and underfunded pension obligations."

Standard & Poor's also downgraded the city's AA+ ratings for certificates of participation and lease revenue bonds to AA.

The downgrade marks the first time in more than three decades that Standard & Poor's has given Omaha anything less than an AAA rating.

Last year, the city lost its AAA rating from Moody's Investors Service over similar pension-related concerns. Omaha had a top rating with that agency for decades until 2008, when it dropped to AA1. Moody's restored the AAA rating in 2010 before again dropping it a notch last year.

A lower bond rating can make lenders more hesitant to provide money to the city — which means it could cost more to pay for major city projects.

But Stothert said she does not expect borrowing rates to jump dramatically.

"Our bonds issued last year, with Moody's downgrading a notch, were some of the best interest rates we received," she said.

The city's bond rating was an issue in this year's mayoral election between then-Mayor Jim Suttle and City Councilwoman Stothert. Suttle took credit for protecting Omaha's rating, but Stothert challenged Suttle's financial management, saying she would cut spending and lower taxes.

Stothert traveled to Chicago last week to meet with both rating agencies. She had hoped the city's new fire contract, which she helped negotiate as a City Council member, would persuade the agencies to restore the top rating.

Contact the writer: Erin Golden

erin.golden@owh.com    |   402-444-1543    |  

Erin covers the Omaha City Council and the Mayor's Office.

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