| | Published November 2nd, 2016
| ConFire Not Rattled by $75 Million Pension Bond Downgrade
| | | By Nick Marnell | | |
Moody's Investor Services recently downgraded $75 million in Contra Costa County Fire Protection District pension obligation bonds but district officials, while conceding that pension costs remain high, said the action poses no immediate threat to district finances or operations.
The credit rating company lowered the district bond rating from A1 to A2 based in part because of "the long-term challenge the district faces in addressing its rising pension costs, which are an unusually large portion of the district's operations." Indicating that the growth in short-term property tax receipts will mitigate the risk of ConFire's pension expense, the New York firm removed its negative outlook on the bond rating.
"Pension related costs are a significant portion of ConFire's operating budget and will continue to be through fiscal year 2022-23 when the district's pension obligation bonds will be paid off," said county administrator David Twa, but he added that even the recently confirmed $2 million increase in the pension payment to the Contra Costa County Employees' Retirement Association should have no negative impact on the district.
According to Jackie Lorrekovich, district chief of administrative services, the ConFire pension obligation bonds cannot be called by the issuer nor can the interest rate be increased because of the lowered rating. She emphasized that the bonds are secured by a unique tax-intercept feature requiring the county to set aside the first annual apportionment of property taxes collected in order to cover debt service payments before ConFire receives any property tax revenue for its operations. "This, in my opinion, makes the bonds very secure from an investor perspective," Lorrekovich said.
District officials stressed that the rating drop will have no effect on district operations. The rebuild of station 16 in Lafayette will not be impeded and ConFire should have no problem financing additional apparatus. Were the district to try to issue a second pension obligation bond, the lowered rating on the current bonds would hypothetically impact the interest rates available to the district, Lorrekovich said, but ConFire has no plans to issue more pension obligation bonds.
"I think we are in better financial shape than we have been in a long, long time. That is why the rating drop is perplexing to me," Fire Chief Jeff Carman said. "We have sufficient reserve, more than is required by the board." Not only does ConFire recognize more than $30 million in available reserves but in 2016, determined to add a new revenue source, the district assumed the bulk of the Contra Costa County ambulance transport contract, projected to net an additional $2 million to the district in its first year. In part because of improved district finances, ConFire announced Oct. 25 that it will reopen fire station 87 in Pittsburg, closed since the middle of 2013.
"Barring a catastrophic economic collapse I think we are very stable where we are," Carman said.
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Lamorinda Weekly, Moraga CA