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.