Fitch Ratings revised its outlook on Kansas City, Mo.'s general obligation, lease and special obligations ratings to stable from negative in recognition of its advances in pension funding and the decision to scale back on an ambitious capital spending plan.
The city carries a Fitch AA rating on its $449 million of GO debt and an A-plus rating on another $940 million of lease and special obligation debt.
The city's rating benefits from a deep and diverse economic base, an expanding population, and stable financial performance in recent years. The need for voter reauthorization every five years for its earnings tax is a challenge, according to analysts. The tax provides about 30% of the city's general and debt-service fund revenues. It was last approved in 2011.
Kansas City's once-strong pension fund ratios have fallen to about 79% because it has failed to make the annual actuarially required contribution, but the government has made progress by negotiating concessions with employees in two of its four pension plans. The proposals call for higher employee contributions and would lower benefit costs. The state Legislature still must approve the changes.
The 2013 budget cuts 105 positions and officials anticipate ending the year with a modest addition to general fund balance. "Overall, Fitch does not expect debt levels to materially rise given the more moderate borrowing plans and the average payout of existing debt," analysts wrote.
