Press Release|Public Finance

KBRA Affirms AA Rating on City of Birmingham, AL General Obligation Bonds and General Obligation Warrants; Outlook is Stable

27 Oct 2023   |   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 extremely low pension funded ratios are the result of more than 16 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.

Rating Sensitivities

For Upgrade

  • A sustained trend of improved pension funding ratios resulting from the steady implementation of 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 rating and relevant documents, click here.


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