Santa Fe cries foul after Moody?s considers credit downgrade for pension debt

IS IT REALLY THAT BAD?: The Moody?s ratings service has serious questions about four New Mexico communities.

By Rob Nikolewski ? New Mexico Watchdog

SANTA FE ??One of Wall Street?s?highly-regarded bond credit rating agencies has put four New Mexico communities on ?review? for possible downgrades due to their pension obligations.

The finance director for the state?s capital city said the ratings giant?s numbers are wrong.

Moody?s Investors Service has released a list of 29 local government entities across the country that the company claims have net pension liabilities that are too large compared to their rating category. On the list? The New Mexico cities of Santa Fe, Las Vegas?and?Alamogordo, as well as Sante Fe County.

Moody?s compiled the list after changing the way it analyzes pension obligations on the state and local levels.

?We believe liabilities are underreported from a balance sheet perspective,? said Timothy Blake, Moody?s managing director, when the list was released in mid-April. ?The purpose of the adjustments is to provide greater transparency and comparability in pension liability measures for use in credit analysis.?

Moody?s ranked the city of Santa Fe as the worst in the country, saying it has net pension liabilities equal to six times its operating revenue.

But Sante Fe?s finance director said Moody?s is way off base.

?Their calculation is skewed,? Marcos Tapia told New Mexico Watchdog, noting the city is not a Moody?s client. ?We?ve told Moody?s, we need you to retract this, you need to correct this.?

Tapia says Moody?s didn?t take into account that?pension obligations to city employees come from the state-run Public Employees Retirement Association and not the city.

?They?re making assumptions that we fund our own pension plans,? Tapia said. ?We don?t.?

Two other national?ratings services have not placed Santa Fe on a review.

Fitch has given the city a AA+ rating with a stable outlook. Standard & Poor?s?gives the city a AA rating, Tapia said. S&P?s ratings scale?lists AA as ??Very strong capacity to meet financial commitments.? For both ratings agencies, AAA is the highest rating available.

Fitch does not have a rating for Las Vegas, Alamogordo or the county of Santa Fe.

Alamogordo?s finance director, Kenneth Johnson, said he believes the Moody?s review is based in part on stricter disclosure rules mandated by the Governmental Accounting Standards Board, the accounting experts used by state and local governments in the United States.

Johnson said the unfunded pension liability for Alamogordo has been reported at $40 million.

?That?s a big number,? Johnson said. ?The underlying foundation is this ??we have an obligation to fully fund retirement benefits?rest assured, we will meet our pension benefits.?

New Mexico Watchdog left voicemail messages with the finance directors at Santa Fe County and Las Vegas but had not received a return call by publication Tuesday.

The Moody?s list received national attention when, on Monday, the service downgraded Chicago?s credit rating because of the?Windy City?s large and growing pension obligations, and comes just four days?after Detroit?filed the largest municipal bankruptcy in?American history.

?You can?t compare Detroit to Santa Fe, New Mexico,? Tapia said. ?Detroit?s problems were coming to a head, 40 percent of buildings abandoned, come on?We have to handle balanced budgets. Are we conservative financially? You bet. That?s my nature.?

Wayne Probst, executive director at PERA, said he was surprised by the Moody?s review.

?I don?t know where Moody?s is getting their numbers from,? Probst told New Mexico Watchdog. ?I can?t?say they?re wrong but I think there are real questions they need to answer?I?ve gone to our own actuaries and said, ?How is this thing being calculated?? and they can?t figure it out either.?

In addition, the?Legislature?passed and Gov. Susana Martinez signed into law a ?pension-fix??in the past legislative session that promises to put state employee retirement funds on much firmer financial footing.

?We?ll be updating our actuarial valuations in the fall,? Probst said. ?I do anticipate significant improvement from this pension reform. Now it?ll take a couple of years to analyze?(but) I think we?ll have some good news to report for a change.?

Moody?s spokesman Thomas Lemmon said the review process could potentially lead to a downgrade and that ?a committee of folks make the determination? within 90 to 180 days after the review list is compiled.

Since the list?was posted April 17, decisions on potential?ratings changes could take until mid-October.

New Mexico Watchdog requested to talk to an analyst involved in compiling the list, but as of late Tuesday afternoon, we had not heard back.

Here?s the list of the 29?local governments under review by Moody?s.

Contact Rob Nikolewski at rob@nmwatchdog.org and follow him on Twitter @robnikolewski

The post Santa Fe cries foul after Moody?s considers credit downgrade for pension debt appeared first on Watchdog.org.

Source: http://feedproxy.google.com/~r/SayAnything/~3/s2cYSFguaiU/

Apple.com Tony Awards e3 Edward Snowden Xbox One new Mac Pro brody jenner