This Business Wire news release talks about the latest Fitch Ratings. I am far from an expert in these business/math/accounting things (feel free to help out in the comments), but these paragraphs caught my eye:
Despite recently agreed upon program changes and funding commitments that have reduced the $1.8 billion unfunded actuarial accrued liability (UAAL) of the city’s municipal employee pension system by an estimated one-half, that program and the police officers’ and firefighters’ pension plans all face potentially sharp increases in UAAL over the near term. In addition, Fitch views the city’s debt financing of a portion of the city’s annual contribution to both the municipal and police pension systems as an indication of financial stress and considers this funding approach an unfavorable credit factor.
The impact of pension-related borrowing as currently envisioned is expected to have a minimal effect both on the city’s capital improvement plan and projected debt service tax rates. The city’s debt ratios, both on a per capita basis and as a percentage of taxable assessed valuation (TAV), are moderate. The pace of repayment on the city’s tax-supported debt is slightly above average.
The new revenue limitation, also referred to as Proposition 1, is a measure approved by voters in November 2004 that applies to ad valorem tax revenues and water and sewer rates. The measure became effective in the current fiscal year, and the budget is in compliance with the new mandate. However, the limitation has the potential to hinder service delivery and capital financing going forward, including pension plan funding. The current rating and outlook presumes that the legal challenge by supporters of a competing, more restrictive measure that garnered less voter support is unsuccessful.
Isn’t that interesting? Of course the second bolded part refers to Prop. 2 which voters approved last fall and which the city has been fighting ever since.
Also notice the references to the city’s pension responsibilities.
(Just for fun, check out this page on Prop. 2’s website.)
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