Kansas City Bond Outlook Revised to Negative by Fitch Citing New Debt Plan

Kansas City (9577MF), Missouri, had the outlook for its AA credit grade revised to negative from stable by Fitch Ratings on concern that the city may borrow too much and that it hasn’t planned to increase pension funding.

“The additional debt layered on the already elevated debt burden may strain available resources,” James Mann, a Fitch senior director in New York, said today in a report, citing costs related to light rail and neighborhood revitalization projects. The city plans to spend $100 million on the transit system and to borrow $100 million a year through the next decade for rehabilitation work, according to Mann.

Fitch rates $310.5 million of general-obligation bonds third-highest at AA, and assigned that grade to $217.4 million in debt to be issued next week. It gave an A+ rating, two steps lower, to $76 million in special-obligation improvement and refunding securities, also set for sale next week. It also grades an additional $1.12 billion in city debt A+.

The city hasn’t fully funded its annual pension costs in at least six years, Mann said in the report. It ended the past fiscal year with a $5.7 million general-fund surplus after failing to put $32.5 million into pension funds for municipal employees. With a jobless rate of 8.3 percent as of December, the city anticipates a $15 million deficit this year, prompting a freeze on hiring and cuts in capital spending, Mann said.

To contact the reporters on this story: David Mildenberg in Austin at dmildenberg@bloomberg.net;

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.