KBRA Revises Outlook to Stable From Positive, Affirms AA+ Rating, on Fort Worth, TX, General Purpose Bonds, Tax Notes, Obligation Certificates
1 May 2024 | New York
KBRA has affirmed the long-term rating of AA+ to the General Purpose Bonds, Tax Notes and Combination Tax and Revenue Certificates of Obligation (collectively, "the General Obligations") of the City of Fort Worth, TX. The Outlook is revised to Stable from Positive.
The Outlook revision reflects KBRA’s observation that despite pension reform measures enacted in 2018, the City’s annual employer contributions to the Retirement Fund remain significantly below the actuarially determined contribution (ADC), as has been the case in each of the last ten years. While the Employees’ Retirement Fund’s $2.5 billion FY 2023 net pension liability (NPL) equates to a manageable 2.3% of the full market value of the City’s rapidly growing assessment base, in KBRA’s view, the plan’s extremely low funded ratio has the potential to restrict long-term financial flexibility should pension reforms fail to improve the plan’s funded status.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Strong financial reserves and liquidity, bolstered by conservative budgeting practices and formal fiscal policies.
- Vibrant economic growth, evidenced by a diverse and rapidly growing tax base.
Credit Challenges
- Pension contributions remain below the ADC, and the funded ratio of the City’s Retirement Fund remains low despite numerous pension reforms enacted to date.
- Partial reliance on potentially volatile sales tax revenue exposes the GF revenue base to economic fluctuations.
Rating Sensitivities
For Upgrade
- Tangible progress in addressing full funding of the actuarially determined pension contribution
For Downgrade
- Weakened financial flexibility due to lack of improvement or worsening of pension funding metrics.
- Sustained reduction in tax revenues not sufficiently offset by permitted increases in property tax rates.
To access rating and relevant documents, click here.