Moody’s Issues Negative Outlook for Kansas CIty

We’ve written before about Kansas City’s debilitating level of debt (here and here and here). And it isn’t just us; the Mayor’s own Citizens Commission on Municipal Revenue 2012 report cites high debt as a problem and warned about the negative impact to the city’s credit rating. This warning, which appears to have been ignored, was prescient. As Kansas City leaders propose borrowing $800 million dollars via a general obligation bond, a major credit agency has weighed in.

Just two weeks ago, Moody’s Investor Services, one of the nation’s premier credit rating services, revised Kansas City’s credit outlook to “negative.”

The negative outlook reflects the growth of the city’s pension obligation and, when coupled with the elevated debt burden, the increase of fixed costs outpacing revenue growth. Continued leveraging of the tax base or unabated expansion of the pension obligation will place downward pressure on the rating.

This comes as Kansas City leaders are asking voters to approve another round of debt, backed by an increase in property taxes, to pay for the sort of maintenance that the city should be paying for with our already-high property, sales and income taxes.

The problem is that city leaders keep throwing money at things like subsidies for downtown development and large consulting contracts instead of dedicating funds to basic services. Frequent borrowing and an increasing debt load mean lower credit ratings and higher borrowing costs—the city seems locked in a payday loan–like cycle. Moody’s seems to recognize this even if policymakers don’t, and citizens may have to take matters into their own hands if this cycle is to be broken.