JACKSON, Miss. (WLBT) – Jackson’s credit rating has been dealt a major blow by one of the nation’s top rating agencies, in part, because the city has not completed timely audits.
Last summer, Moody’s Investors Service withdrew its general obligation and special obligation bond rating from Jackson, citing a “lack of sufficient information, including audited financial information.”
The lack of a credit rating likely means the city will face higher interest rates when issuing bonds, which could increase the overall costs of borrowing money for public projects.
The agency made the announcement back in July, some nine months after the city’s 2022 Comprehensive Annual Financial Report was due under state statute. That report would not be completed until the following month.
Fast forward eight months, and the city has yet to complete work on the 2023 CAFR, which was due September 30.
Chief Financial Officer Fidelis Malembeka said accountants were seeking some information from the city but hoped to have that audit completed this month.
“There was information we needed from JXN Water. I’m told they’ve compiled that. I have not seen it yet, and so that is one thing I’ll be checking on,” he said. “That was a major part, whether we could get a lot of that material from JXN Water.”
It was not known what information the city needed from JXN Water. We have reached out to the utility and are waiting to hear back.
Cities across Mississippi are required to complete contract audits annually, with the audits due within 12 months of the end of the previous fiscal year.
Meeting the contract audit deadline is nothing new. Jackson’s 2021 CAFR was not finished until February 2023, while Jackson’s 2020 audit wasn’t completed until February 2022, according to copies of the documents found on the Mississippi State Auditor’s website.
Before 2020, the city’s audits were usually on time, with the 2019 CAFR being completed in August 2020, and the 2018 audit being wrapped up on July 1, 2019.
CAFR submission dates by year:
- 2022 – August 15, 2024
- 2021 – February 20, 2023
- 2020 – February 14, 2022
- 2019 – August 31, 2020
- 2018 – July 1, 2019
- 2017 – July 24, 2018
- 2016 – April 28, 2017
- 2015 – May 11, 2016
“We just [have] a difficult time getting information to the auditor in a timely manner,” Ward One Councilman Ashby Foote said. “This has been going on for several years.”
Ward Six Councilman Aaron Banks voiced his frustrations with the problem last May when he asked the council to hire a new CPA firm.
“It just seems to me that we can’t go another year with the back-and-forth that has been going on. And it seems to me that the wisest thing to do, for the sake of time, is to explore a new relationship, because of the frustration I’ve seen on both sides,” he said.
At the time, the city was using Tann, Brown & Russ Co., to conduct the audits.
Banks said accountants with the firm claimed city employees wouldn’t provide them with the information needed to complete the reports. City employees argued the firm was hard to work with.
Scott Hodges, a partner with Tann, told Banks changing CPAs wouldn’t make a difference.
“It has nothing to do with the audit firm. It has to do with the city’s Finance Department not providing the information… You can hire any auditor you want, but the delay would be the same,” he said.
Moody’s can withdraw credit ratings for several reasons, including a lack of or incorrect information, bankruptcies, and corporate reorganizations.
The rating agency first placed Jackson review in October 2023. Jackson was one of four Mississippi entities to make the list. Others included Rankin and Lamar counties, the city of Meridian, and Jackson’s Water and Sewer Enterprise.
Jackson was still on review in April 2024, with Moody’s saying in a press release that if “the information is not received over the next 30 days, we will take appropriate rating action, which could include the withdrawal of the issuers’ ratings.”
Jackson’s previous general obligation rating was a Baa3. According to Moody’s website, “Baa” ratings are “medium-grade and subject to moderate credit risk, and as such, may possess certain speculative characteristics.”
In 2018, the Clarion-Ledger reported the agency downgraded Jackson’s bond debt rating from Baa2 to Baa3 after the city borrowed money from the general fund to cover water and sewer shortfalls.
Malembeka said once the 2023 audit is completed, his office will work with Moody’s to have the city’s credit rating reinstated and is hopeful the rating will go up now that water and sewer are no longer run by the city.
“For a long time, the argument was made if you separated the two, the city’s general obligation [rating] would be much stronger if you separated it from water and sewer because of the billing issues we had,” he said.
“There was not much of an appetite to say you need to separate the ratings. So, when the transition happened with JXN Water, it was a stronger argument to say, ‘the city is not actively managing the collection piece.”
As of last year, Jackson had about $244 million in outstanding general bond debt.
In 2023, the city council approved issuing $40 million in new debt for road, bridge, and drainage projects. That debt would be repaid using the city’s Modernization Tax Revenue.
The Mississippi Development Bank authorized the sale of those bonds in February 2024. However, as of March 20, the bonds still had not been sold.
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