JACKSONVILLE, Fla. -

Citing the city’s high fixed costs and weak pension funding level, Moody's Investors Service has downgraded the city of Jacksonville’s bond rating from Aa1 to Aa2, and its special revenue bond rating from Aa2 to Aa3.

The city's bond rating matters as a lower rating means higher interest rates when the city wants to borrow money. The city currently has $2.4 billion in debt affected by Moody's ratings.

In it's rating update, issued Wednesday, Moody’s did say the city’s overall financial outlook is stable.

"Assignment of stable outlook reflects the resurgence of the local economy, our expectation that the city will maintain sound reserve levels and the forthcoming implementation of the new pension reform plan," the report stated.

DOCUMENT: Moody's ratings update on city of Jacksonville

Earlier this week a consultant to the Jacksonville Retirement Reform Task Force released an analysis of that new pension reform plan reached last month between Mayor Alvin Brown and Pension Fund executive director Alvin Brown. 

David Draine, of Pew Charitable Trusts, said the deal now pending before Jacksonville City Council offers a “comprehensive solution” to public safety pensions.

The latest deal between the two sides doesn’t entirely reflect the recommendations that task force spent months developing, such as cost-of-living adjustments to current public safety employees. Those were left off the table, with fund administrator John Keane calling it a non-starter.

By leaving that portion out, the city reduced its savings by about $237 million, Draine said in his analysis.

That’s offset some by the fund turning over about $117 million in chapter funds and reserve accounts and another $26 million saved from final average salary changes.

In all, Draine estimated the task force’s recommendations would have saved $1.77 billion compared to the current deal’s $1.54 billion.

But while many recommendations were followed, there is lack of a funding source for the city’s additional $40 million in annual fund payments.

Some City Council members have offered early criticisms on that point, too. Draine goes on to discuss that those additional payments are cut off after 10 years, regardless if the fund reaches the 80 percent threshold that often determines a healthy plan.

Despite their absence, he said both aspects can be altered outside the negotiation process between the two sides.

Legislation reflecting the deal was introduced last week to council, which will spend the upcoming weeks reviewing the deal.

The latest deal came after weeks of discussions moderated by former state Sen. Rod Smith.

Current employees would end up paying 10 percent of their salaries toward their retirements after past pay cuts are restored. New employees start at that 10 percent contribution rate.

While there were no changes to cost-of-living for current employees, the rate of return for the Deferred Retirement Option Program went from a guaranteed 8.4 percent to a floor of 5 percent and ceiling of 10 percent.

With the exception of a retirement calculation, the plan for new employees mirrored the one the two sides reached last year.

Governance changes include the addition of an investment advisory group to help the fund, additional ethics and transparency guidelines and a method to select the fund’s next administrator. Like the cost-of-living stalemate, the board’s composition and selection of the last member remain unchanged despite Brown’s pursuit.

Channel 4 spoke with people involved in the pension debate Thursday night about why the pension deal may be to blame for the city’s credit score.

“We think it makes it all the more imperative that we pass this retirement reform agreement so that other two credit rating agencies don’t follow suit, which they could later this year. If we don’t pass this agreement,” said Brown’s Chief of Staff, Chris Hand.

City leaders met with the former pension task force Thursday to discuss the plan that Brown’s office has submitted to City Council to fill a $1.8 billion pension hole that will have to be dealt with in coming years.

Attorney and former head of the task force, Bill Scheu, helped develop the plan, but he didn’t make the final plan -- the mayor’s office did. Scheu told Channel 4 Thursday that the new version doesn’t tackle things like cost of living adjustment, referred to as COLA.

“There are big issues remaining -- COLA for existing employees. We recommended some changes and (this) agreement does not have that. We have recommended an extra $50 million a year. The mayor’s plan does not specify that money,” said Scheu.

The plan will go to City Council, who have been made aware of the credit downgrade.

“From a pension reform standpoint it’s clearly an issue. The longer that we wait, the longer the markets are waiting for a final resolution here,” said Councilman Greg Anderson.

David Chapman, staff writer with our news partner, Financial News & Daily Record, contributed to this report.