BRADENTON, Fla. - Moody's Investors Service downgraded Shreveport, La.'s general obligation bond rating to A2 from A1 due to weak liquidity and the use of reserves.
The action impacts $228 million of rated GOs, Moody's said Sept. 15.
The negative outlook has been removed and no other outlook assigned.
"The A2 rating and downgrade reflects prolonged weak liquidity within the city's general fund, steady draws on reserves, with challenges to building liquidity in the near-term," said analyst James Hobbs.
The lower rating also considers the city's operating pressure and challenges with building cash reserves given increases in pension contributions and heavy reliance on volatile sales taxes, he said.
The rating incorporates Shreveport's strong debt service fund liquidity, broad local economy, and a tax base that is expected to grow modestly in the near-term, according to Moody's.
"Despite returning to positive operations fiscal 2014 after four consecutive years of operating deficits, the city's general fund liquidity remains weak," Hobbs said.
At the end of fiscal 2014, the city's total general fund balance grew to $15.9 million or 7.5% of revenues, from $12.9 million in the previous year.
The year ended with a $3 million operating surplus, though cash and investments fell to $7,000 due the payment of liabilities to other funds.
"The city's fixed costs, including debt service, total actuarial pension requirements, and annual retiree healthcare costs totaled a sizeable $93.7 million or a significant 38.8% of operating revenues in fiscal 2014," Hobbs said. "However, the city did not fund its full pension requirement and fixed costs were a more moderate $79.2 million or 32.8% of operating revenues."
The City Council adopted reforms to its pension plans last year increasing contribution rates for employees and the city, reducing the benefits multiplier, and modifying eligibility for new hires.
In 2014, before reform, the contribution rates led to a $14.4 million shortfall of the actuarial required payment.
Moody's said its adjusted net pension liability for the city was $551.6 million for fiscal 2014, down from $640.2 million the previous year.
Shreveport, in northwest Louisiana, is home to Barksdale Air Force Base and its more than 10,000 employees, state government offices, Louisiana State University's Health Sciences Center, and Willis-Knighton Health Systems.
Standard & Poor's assigns an A-plus rating to the city's GO bonds.
