Omaha picked up a couple of slightly mixed signals Friday from the barometers of its economic standing. Both put the city on a solid foundation but both point to pension problems.
Moody's Investment Service reaffirmed Omaha's Aa1 bond rating, calling it a reflection of the city's strong economy, growth in property valuations and an improved financial position.
Standard and Poor's has downgraded the city's rating from AAA to AA+. That's the second highest rating possible. S&P cited strong budgetary performance, very strong cash levels to cover debt service and expenditures, strong management conditions with good financial practices and policies and a strong institutional framework.
Both agencies point to the city's unfunded pension liability as the major area of concern.
A city hall news release quotes Mayor Jean Stothert as saying, "This is a wake-up call for our unions. We must address the unfunded pension liability with a long-term solution. We have two choices; a massive influx of cash into the pension, which could only be achieved with higher taxes, or long-term pension reform which combines benefit changes with creative solutions."
Negotiations are currently under way wit the Civilian Union and Police Management. Talks with the Police Union will begin soon. The contract ratified by the Fire Union in December 2012 included increased individual pension contributions and decreased pension benefits. That contract expires in 2014.
According to the release from the mayor's office, Moody's now calculates the city's unfunded pension liability at $1.6 billion based on its new criteria for evaluating every city's pension obligations. The city's actuarial estimate is $800 million.