BRADENTON, Fla. – Improvement in Atlanta's fiscal health led Moody's Investors Service to upgrade the city's general obligation debt to Aa1 from Aa2.
Friday's upgrade affects $354 million in general obligation debt, $93.8 million of revenue bonds issued through various authorities and secured by the city's unlimited ad valorem pledge, and $79.7 million in limited tax GO bonds issued by the Atlanta Fulton County Recreation Authority.
The outlook is stable.
"The upgrade to Aa1 reflects the marked improvement, followed by stability, in Atlanta's fiscal health due in part to various revenue enhancements, expenditure reductions, including pension reform, and formalized fiscal policies and practices," said analyst Lauren Von Bargen.
The Aa1 rating also reflects the city's large, diverse tax base that serves as a hub for trade and transportation in the southeast region, which has improved following the recession, as well as a manageable debt burden and "lowly funded, albeit manageable, pension plans," Von Bargen said.
Moody's also assigned an Aa1 rating to the city's $8 million of various purpose general obligation bonds, expected to price competitively next week.
Moody's upgrade brings its rating in line with Fitch Ratings, which affirmed its AA-plus GO rating and stable outlook on Friday.
Jim Beard, Atlanta's chief financial officer, said Monday that the city is pleased that its hard work on pension reform, fiscal practices, and focus on maintaining structurally balanced budgets has been recognized.
"As the chief financial officer, it has been a stated goal to achieve the highest possible credit ratings and ensure that the city is in the best possible financial position as we continue to provide excellent service to our residents and visitors," he said.
Atlanta's financial position is likely to remain stable following a period of rapid growth in reserves given revenue stabilization and conservative budgeting practices, according to Moody's.
The city reported six consecutive operating surpluses, increasing the available general fund balance to $149.1 million in fiscal 2015 from a low of $4 million in 2009.
Its tax base has begun to rebound, reporting two years of growth following five years of declines, Moody's said.
In November, the Georgia Supreme Court tossed out a class-action union appeal of Atlanta's pension reform package ruling that the city did not violate the state's constitution when pension benefits were altered in 2011.
Although analysts believe that Atlanta's combined pension burden remains moderately high, the benefit restructuring has factored into GO bond rating upgrades.
In June 2014, Standard & Poor's raised its GO ratings to AA from A based on the city's strong economy and budget flexibility, as well as "still sizable pension and other post-employment benefits liabilities."
The aggregate funded ratio of the pension plans improved to 67.6% in fiscal 2014 compared to 57% in fiscal 2010, while the actuarial required contribution was sizable but more affordable at $93 million in 2014 compared to $143.6 million in fiscal 2009, according to Fitch.
