Moody's Investors Service said it has downgraded the city of Dallas, Texas's rating to Aa2 rating affecting $1.7 billion of outstanding general obligation limited tax debt.
It assigned a stable outlook for the city. Concurrently, Moody's affirms the city's P-1 ratings on their general obligation commercial paper notes.
The downgrade to Aa2 reflects the city's very large and growing unfunded pension liabilities, a high fixed cost burden, and basic infrastructure needs which it expects to keep the direct debt burden elevated.
The rating also incorporates favorable factors such as positive economic indicators that exceed national averages, an improving financial position in recent years, and the recent change in leadership at the Police and Fire Pension Fund that is looking to improve asset performance.
The rating action recognizes ample financial flexibility of the city bolstered by an expanding economy and tax base, while weighing the political challenges to achieving legislative changes and voter authorization to improve pension funding.
The P-1 ratings related to the commercial paper notes are based upon the short-term ratings of the banks and Moody's assessment of the likelihood of termination of the liquidity commitments without payment of the commercial paper notes.
