Fort Worth bonds score AA+ rating, outlook ‘stable’

A. Lee Graham Reporter   Fitch Ratings has given the city of Fort Worth an AA+ rating for several bond issues.   The agency’s bond ratings vary from D (default) to AAA (highest credit quality), with AA denoting “very high credit quality” with very low default risk.   Securing the Fort Worth rating was Fitch’s evaluation of $35.8 million general purpose refunding and improvement bonds, series 2013; $63.4 million combination tax and limited surplus revenue certificates of obligation (COs), series 2013A; and $11.2 million combination tax and limited surplus revenue COs, series 2013B.   Series 2013 bond proceeds are expected to finance street, drainage and park improvements and refund part of the city’s outstanding tax-supported debt, with series 2013A and 2013B CO proceeds financing infrastructure and civic improvements.   “Despite revenue declines, the city’s recent financial performance has been solid, characterized by generally positive operating margins and increasing reserves,” reads part of a Fitch news release.   But challenges remain.   “Pension funding levels are only adequate, and are weak when a more conservative estimated investment return is assumed. The city has a manageable overall bonded debt burden, and payout of tax-supported debt is rapid,” Fitch said.   The agency described the city as enjoying a “large and diverse regional economy,” with its proposed fiscal 2014 budget including “…a much smaller initial budget gap, indicating progress in addressing this problem,” referring to a budget imbalance.   Changes made to the city’s pension plan for non-uniformed and police employees should improve funding levels over time, the report said. “Successful resolution of a legal challenge to certain aspects of the program revisions, and inclusion of Fort Worth firefighters in the pension reform effort, will be credit considerations going forward.”   The report described the city’s financial reserves as healthy.   “The city’s financial performance has been positive in recent years, characterized by net gains and increases in general fund reserves well in excess of the policy target level,” said the report, describing audited results in each of the past three fiscal years as better than earlier projections .   “While management has successfully addressed large budget gaps the past several years, a structural gap between operating revenues and outlays persists,” the report said.   The current projection for fiscal 2013 includes a gain in sales tax and other revenues and spending generally in line with the revised budget, the report said.   “Fiscal 2014 is expected to see a continuation of financial pressures, although the proposed budget includes a 2.4 percent ($14 million) reduction in general fund spending from the fiscal 2013 budget and a more manageable $7 million initial budget gap,” the report said. Fitch said it will continue to monitor the city’s progress in addressing the structural imbalance   Despite describing the Fort Worth area’s employment base as “extensive,” it pointed out that the city has not been immune to negative economic factors. Those include the bankruptcy filed of American Airlines’ parent company AMR Corp., which announced 13,000 layoffs in 2012.   “The proposed merger between AMR and US Airways suggested an exit route from bankruptcy, but the recent announcement by the U.S. Justice Department to challenge the merger on antitrust grounds casts doubt on this prospect,” the Fitch report said.   Despite AMR and other isolated layoffs, Fitch pointed out that Fort Worth has added jobs, even during the recent economic downturn. For example, the city’s unemployment stood at 6.5 percent in May 2013, down from 6.8 percent in the same period last year. More information is available at