Rating Action: Moody’s downgrades Kansas City, MO’s GO to Aa3; outlook remains stableGlobal Credit Research – 05 Mar 2021Assigns Aa3 to GO Bonds, Series 2021ANew York, March 05, 2021 — Moody’s Investors Service has downgraded the City of Kansas City, MO’s general obligation unlimited tax (GOULT) rating to Aa3 from Aa2 and the city’s annual appropriation and lease appropriation debts to A2 from A1. Concurrently, we have assigned a Aa3 rating to the $79.2 million General Obligation Refunding and Improvement Bonds, Series 2021A and A2 ratings to the $63.2 million Special Obligation Bonds (Kansas City, Missouri Projects), Series 2021A, $68.4 million Taxable Special Obligation Refunding and Improvement Bonds (Kansas City, Missouri Projects), Series 2021B, $49.1 million Taxable Special Obligation Refunding Bonds (Kansas City Downtown Redevelopment District), Series 2021C, and $4.9 million Special Obligation Bonds (Main Streetcar Extension Project), Series 2021D. The outlook remains stable.RATINGS RATIONALEThe downgrade of the city’s GOULT rating to Aa3 from Aa2 reflects the material disruption to the city’s economy due to the coronavirus pandemic, particularly with regards to economically sensitive revenue streams and the severe contraction of operating reserves that will occur through fiscal 2022. Operating pressure is occurring in conjunction with deepening leverage comprised of a high debt burden and growing pension liabilities. The combination of perpetual underfunding of the city’s four pension plans and insufficient investment returns are contributing to material growth in long-term liabilities. The Aa3 rating also incorporates the city’s large and dynamic tax base that serves as a regional economic and employment center coupled with stable resident income and a below average cost of living. We view the impact of the coronavirus pandemic on the city’s financial operations as a social risk that could pressure the city’s ability to maintain service levels.The downgrade of the city’s annual appropriation rating to A2 from A1 reflects the inherent underlying credit quality of the city, the risk of non-appropriation, the lack of pledged assets securing the debt, and the less essential nature of the various projects financed.RATING OUTLOOKThe stable outlook reflects the inherent strength in the city’s large and dynamic tax base, that while pressured currently, is expected to remain a regional economic and employment center post-coronavirus.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Financial performance which outperforms current expectations- Significant reduction of unfunded pension liabilities and debt obligations- Trend of materially bolstered reserves- Upgrade of the city’s GOULT rating (annual appropriation)FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Deterioration of financial reserves beyond current expectations- Significant increase in long-term liabilities- Downgrade of the city’s GOULT rating (annual appropriation)LEGAL SECURITYThe city’s general obligation unlimited tax (GOULT) debt, including the Series 2021A bonds, are general obligations of the city, payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all taxable tangible property, real and personal, within the territorial limits of the city. The full faith, credit and resources of the city are irrevocably pledged for the prompt payment of the GO bonds.The city’s special obligation debt, including the Series 2021A-D bonds, are special obligations of the city payable solely from funds which have been annually appropriated or pledged by the city to repay the bonds and held by the Trustee as provided in the respective indentures. Payments for the bonds may be made from any funds of the city legally available for such purpose.USE OF PROCEEDSProceeds of the general obligation bonds will finance capital projects throughout the city including streets, flood control, and public buildings and structures.Proceeds of the special obligation bonds will be used to refund certain maturities of outstanding special obligation debt as well as additional capital projects, including extension of the city’s streetcar system. A portion of the refunding will be used to transition the fiscal year 2022-2026 maturities of the city supported Industrial Development Authority Bonds, KC Live Project Refunding, Series 2011A to fiscal years 2034-2040.PROFILEKansas City is the central city of a 14-county Metropolitan Statistical Area in the State of Missouri (Aaa stable) and the State of Kansas (Aa2 stable). The city is situated at the confluence of the Kansas and Missouri rivers. The city’s estimated population in 2020 was approximately 500,000 residents.METHODOLOGYThe principal methodology used in the general obligation ratings was US Local Government General Obligation Debt published in January 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1260094. The principal methodology used in the lease ratings was Lease, Appropriation, Moral Obligation and Comparable Debt of US State and Local Governments published in January 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1260202. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Kenneth Surgenor Lead Analyst Regional PFG Dallas Moody’s Investors Service, Inc. 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