One of the top Wall Street credit-rating agencies said the recent court ruling upholding San Diego’s pension reform is “credit positive” for the city’s debt.
Moody’s Investors Service said the ruling is “beneficial” for the city’s finances and maintained its Aa2 rating of the city’s bond issues.
“This is why we’ve worked so hard to defend pension reform and make sure that the will of the voters is upheld,” said Mayor Kevin Faulconer. “It’s great to see a rating agency affirm that keeping our reforms in place is hugely important to our city’s financial health.”
In 2012, San Diego voters overwhelmingly approved Proposition B — a citizens’ initiative that replaced pensions with 401(k)-style retirement benefits for all new hires except police officers.
The state Public Employment Relations Board later ruled that the former mayor and City Council violated state labor law. But last month, the Fourth District Court of Appeal upheld pension reform.
“The ruling is credit positive for the city because it averts a complex, and likely expensive, unwinding of reforms that ended defined-benefit pensions for most city workers hired after June 2012,” Moody’s said. “The beneficial ruling, which overturns a state labor board decision, comes at a time when rising pension costs are exerting greater pressure on the city’s budget.”
In February another ratings agency, Fitch, upgraded the city’s rating from AA- to AA for general issues and from A+ to AA- for revenue bonds.