Press Release|Public Finance
KBRA Affirms AA Rating on City of Birmingham, AL General Obligation Bonds and General Obligation Warrants; Outlook is Stable
21 Oct 2024 | New York
KBRA affirms the long-term rating of AA with a Stable Outlook on the City of Birmingham's outstanding General Obligation Bonds and General Obligation Warrants.
Key Credit Considerations
Credit Positives
- Financial management policies and procedures are robust and statutorily required by City Charter.
- Strong liquidity and fiscal flexibility are provided through a large unassigned general fund balance, as well as additional governmental fund reserves.
- Birmingham is the main economic driver within the Birmingham-Hoover MSA and the State, with potential for further economic growth.
Credit Challenges
- The City is dependent on economically sensitive business tax revenues for the vast majority of general fund revenues.
- Sizable net pension liabilities and low, though improving, pension funded ratios resulting from many years of underfunding of the actuarial defined contribution and the receipt of below-target investment earnings. Addressing these liabilities as required by H.B. 510, while fiscally beneficial, is expected to contribute to elevated fixed costs over the medium term and potentially pressuring other expenditures, particularly in a recessionary environment.
Rating Sensitivities
For Upgrade
- A sustained trend of improved pension funding ratios resulting from the steady implementation of the pension reforms, including H.B. 510.
- Continued economic development with long-term stabilization trends and growth in City population and wealth levels.
For Downgrade
- Sustained deterioration in pension funding levels.
- An erosion in the economic base that exacerbates revenue volatility.
- Unreplenished draws on the City’s unassigned fund balance in excess of policy limits.
To access ratings and relevant documents, click here.