Newspaper article The Florida Times Union

City's Bond Outlook Is Downgraded to 'Negative'; Fitch Ratings Cites Concerns over Pension Debts and City Council Vote to Reject Reform Plan

Newspaper article The Florida Times Union

City's Bond Outlook Is Downgraded to 'Negative'; Fitch Ratings Cites Concerns over Pension Debts and City Council Vote to Reject Reform Plan

Article excerpt

Byline: Steve Patterson

A major ratings service has downgraded Jacksonville's bond rating outlook to "negative" over concerns about the city's pension debts and its leaders' ability to work together.

Fitch Ratings said that a City Council vote in July rejecting Mayor Alvin Brown's pension reform plan "raises additional questions as to the efficiency of internal decision-making and cooperation ... between administrative and legislative officials."

Two other big ratings agencies - Moody's and Standard & Poor's - both recently described the outlook as "stable," though Moody's mentioned the pension debt as a challenge facing the city. As recently as July, Fitch had called Jacksonville's outlook stable. It lowered the outlook on Aug. 27.

The forecast matters when the city sells bonds and has to negotiate the interest rate it pays investors, but an exact cost of the change in outlook isn't clear.

"It's just like your credit and mine. The worse our credit score is, the more it's going to cost us to borrow," city treasurer Joey Greive said. He said the added costs of a downgrade would hang on the city "every time we issue bonds, from here going forward" until the problem affecting the rating is fixed.

Greive said investors, who ultimately decide what interest rate they'll accept for use of their money, pay close attention to long-term indicators of a city's finances when they're considering bonds that may take decades to mature.

The city had been scheduled to sell about $120 million worth of bonds Wednesday, but Greive said he wasn't able to give a clear-cut answer to how the downgrade affected the cost of that latest borrowing.

The city's pension expenses have skyrocketed in recent years. The contribution for police and fire retirement from the city's general fund has risen from less than $10 million in 2003 to a projected $147 million in the next year. …

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