DALLAS – Moody's Investors Service downgraded $476 million of bonds for the Dallas Convention Center Hotel Corp. one notch to Baa1.
It closed a review of all the city's debt by retaining a negative outlook. Moody's downgraded $1.6 billion of Dallas general obligation debt to A1 on Dec. 12 based on a worsening Police and Fire Pension Fund crisis. At the current rate, the fund is expected to be insolvent in a decade.
In hopes of stabilizing the rapidly declining fund, pension officials temporarily halted withdrawals from the Defined Retirement Option Plan that allowed police to continue working while earning 8% interest on deferred retirement benefits.
The city is also counting on passage of legislation that would redefine pension benefits and provide the city more control of the pension fund. Currently, the city does not control the pension board but is obligated to contribute a share of the funding.
"Moody's continues to have concerns over implementation risk surrounding the proposed reforms to date, as well as the challenges that have plagued the negotiation process, and the questions surrounding the legal ability to limit lump sum withdrawals from the Dallas police and fire pension fund," wrote Moody's analyst Denise Rappmund.
The Dallas Police and Fire Pension Board voted unanimously Monday to support Texas State Rep. Dan Flynn's plan to save the pension fund. State law defines the structure of the pension board, while the city is required to provide much of its funding.
Flynn, R-Canton, chairs the House Pension Committee.
Flynn's proposal would raise the retirement age, eliminate cost of living adjustments for 20 years and lower a multiplier used to determine the pension for police and firefighters from 3% to 2.5%.
The proposed bill would amortize police and fire pension payments based on life expectancy of 78 years. That would mean calculations would be based on the assumption that a retiree at age 50 would receive pension payments over a 28-year period. Police and firefighters have countered with studies showing their life expectancy to be 66 years.
Under Flynn's plan, retirement age would rise to 58 years from 51 for those hired before 2011 and from 55 for those hired after 2011. Some board members, police and firefighters believe that's too old and favor lowering that to age 55.
