City leaders disagree with credit rating drop

Columbia city leaders disagreed with the reasoning behind a drop in its credit rating.

Standard & Poor’s downgraded it’s rating of the city from AA+ to AA on March 8. The agency said “the city’s economic and pension profiles have deteriorated” because of a weaker local economy compared to similar cities and underfunded pension plans for retired police officers and firefighters.

City spokesman Steve Sapp said the city’s financial adviser, Columbia Capital, strongly objected to the downgrade. Columbia Capital did not return a request for comment on why it disagreed with the credit rating agency.

The city’s goal is to fund 80 percent of its pension liabilities every year. It has not done so in the last five years, sitting at 56 percent for both plans in fiscal year 2018.

S&P analyst Cora Bruemmer wrote that the city’s plan to fund these pensions was not “robust.” The city spent 16 percent of its total budget to keep up with the rising cost of pensions this year, up from the 9.5 percent of the budget it took up 10 years ago.

“Given rising pensions cost, which have been on average 4 percent annually over the past 10 years, and the growing percentage of the budget that pension costs compromise, we do not view the city’s plan to be robust.”

S&P said that the University of Missouri does provide “stability” to the local economy, and credited the city for having available cash on hand and ending the last several years with budget surpluses.

Fifth Ward Councilman Matt Pitzer disagreed with S&P’s characterization of their plan. The city overhauled its pension program in 2012 to address the recession and benefits. The city council in 2015 also increased it’s contribution to the pensions with surplus money.

“S&P would really like to see us put every dime that we had into the pension plan and just forget about filling potholes,” Pitzer said. “That’s just really not a realistic idea.”

Pitzer said he did not fear the credit rating downgrading would affect the city’s sale of bonds used to pay for the construction of the Fifth and Walnut Parking Garage, which were issued this month.