Fitch Gives 'Negative' Outlook to City Finances

In the third financial agency rating this month, the city of Annapolis received a “negative” outlook from Fitch, a global ratings agency.

Fitch downgraded the city from stable to negative, citing a low Annual Required Contribution (ARC) to the city’s police and fire pension, according to a press release from the city.

Annapolis Mayor Josh Cohen said Fitch’s determination is a result of the agency not agreeing with the city’s style of accounting.

“During the first two years of critical cost savings, we chose to funnel money into our reserves rather than into the ARC, only putting aside $200,000 a year for the Contribution. However, in FY 2012 and FY 2013 the City set aside $1.6 million for the Contribution and it is now that we get downgraded,” Cohen said in the press release.

Fitch’s rating announcement came Monday. Standard & Poor’s rating of the city’s finances as “strong” was announced Friday; and on May 8, Moody’s qualified the city’s bond rating as positive.

“Over the past three years, we did not strive to make the politically popular decisions, but rather rolled up our sleeves and did what was right.” City Manager Michael Mallinoff said. “This has resulted in our ability to reduced expenses while increasing revenues, build our fund balances, repay all of our short-term lines of credit, and begin to seriously fund our pension plans."

Despite Fitch’s negative outlook, the agency reaffirmed the city’s AA+ financial rating.

The rating could mean a lower interest rate for bonds the city anticipates purchasing for capital projects later this month, according to the release.