Moody's Investors Service said it has downgraded the rating to Aa1 from Aaa on the city of Omaha Neb.'s outstanding general obligation unlimited tax and general obligation limited tax lease rental debt to Aa1 from Aaa.
Moody's assigned a Aa1 to the city's $26.8 million various purpose and refunding bonds, series 2012A and $31.3 million general obligation refunding bonds, series 2012B.
The outlook remains stable. The ratings apply to $519 million and $170 million of outstanding general obligation unlimited tax and general obligation limited lease rental debt, respectively, including the current offerings.
The series 2012A various purpose bonds and the 2012B general obligation refunding bonds are secured by the city's general obligation unlimited pledge of ad valorem taxes, without limitation to rate or amount.
Proceeds of the Series 2012A bonds will refund the city's outstanding debt associated with annexations of the Douglas County (general obligation Aaa) Sanitary Improvement Districts (SIDs) Nos. 300 and 414.
Proceeds of the Series 2012B will be applied to advance refund certain outstanding general obligations associated with the annexations of Douglas County SIDs Nos. 300,330,353, and 440.
The downgrade of the rating to Aa1 is primarily based on persistent under-funding of its pension obligations which is not consistent with the expected financial practices of highly rated cities.
The city also faces challenges to incorporate modifications to bargaining unit contracts in an effort to address significant reform of the unfunded pension obligations.
The Aa1 rating and stable outlook also reflect the city's strong economy with average socioeconomic indices and ongoing growth in property valuations; an improved financial position that is faced with some operating challenges, including the growing unfunded pension liabilities; and above average, yet manageable, debt burden.