Omaha Hit With Credit Downgrade As Pension Liabilities Increase

Omaha skyline

Moody’s downgraded Omaha’s credit rating from Aa1 to Aa2 on Thursday, citing “pension costs” as a major driver of the downgrade.

Moody’s did give the city a “stable” outlook, but admitted that pension costs are “not expected to moderate in the near future.”

Factors that played a part in the downgrade, according to the Moody’s report:

CHALLENGES

– Large and growing unfunded pension liabilities, persistent underfunding of ARC

– High fixed operating costs arising from pensions, debt service, and OPEB

– Protracted union negotiations likely to require retroactive expenses

Factors that could drive the city’s rating up, or further down, from the report:

WHAT COULD CHANGE THE RATING- UP

-Significant progress to reduce the city’s long-term pension and OPEB liabilities

-Reduction in fixed cost burden to the city’s budget

WHAT COULD CHANGE THE RATING – DOWN

-Failure to achieve significant progress towards reducing long term liabilities

Omaha Mayor Jean Stothert released a statement addressing the downgrade. From WOWT News:

“Omaha’s bond rating is still better than 80% of all US cities,” reads a news release from the Mayor’s Office.

[…]

“This bond rating shows we still have a lot of work to do in reforming our public employee pensions,” says Mayor Jean Stothert. “Our unions must realize the severe consequences of delays, inaction and failure to accept reasonable contract offers.”

 

Photo credit: “Omaha skyline humid day” by Mawhamba. Licensed under Creative Commons Attribution-Share Alike 2.0 via Wikimedia Commons