BRADENTON, Fla. — Nashville, Tenn.'s bond ratings suffered downgrades from Moody's Investors Service after it concluded a credit review connected to a change in its rating methodology.
Moody's downgraded to Aa2 from Aa1 the ratings on Nashville's $2.2 billion in outstanding GO bonds, which are secured by an unlimited ad valorem tax pledge.
The agency also dropped the ratings to Aa3 from Aa2 on the Sports Authority of Metro Nashville's $157 million in outstanding revenue bonds, and the Convention Center Authority of Metro Nashville's $419 million in debt.
The outlook on all bonds is stable.
Nashville faces a number of challenges, including continued financial support for the local hospital authority, a requirement to get voter approval in order to raise property taxes above a cap, and an above average debt burden, according to a March 31 report.
"The Aa2 GO rating reflects Metro's favorable overall economic factors given the city's position as the state capital, and regional economic center, stable financial position with below average reserve levels, and manageable debt levels," said analyst Christopher Coviello.
The stable outlook reflects the expectation that the regional tax base will continue to grow and support ongoing governmental operations, including annual financial support to Metro's Hospital Authority, he said.
The city has an extensive capital improvement program that includes issuing debt for schools, the report said. The CIP totals $3.1 billion to be supported by $561 million in borrowing over the next five years.
The city, which is consolidated with Davidson County, contributed 86% of its annual required pension payment of $95.9 million in fiscal 2013. The plan was 85% funded as of the last valuation on July 1, 2012. Under Moody's methodology for adjusted net pension liability, the city's pension obligation is $1.77 billion.
In January, Moody's published a new methodology and said that it would increase the weight it considers to certain factors during the rating process, including debt and pension liabilities.
At the time, the firm placed 256 local government GO bond ratings under review - 52% for upgrade and 48% for downgrade, in conjunction with the new methodology. Nashville was among them.
