Editorial Note: Folks, this is a big deal. What just took place is that Jackson's bond rating was lowered to one grade above junk status, er, I mean speculative grade status. There is no more "cushion" for Jackson in terms of its bond rating.
Moody's Rating Service issued the following press release.
New York, September 10, 2018 -- Moody's Investors Service has downgraded the City of Jackson, MS general obligation rating to Baa3 from Baa2. Concurrently, we have downgraded to Ba1 from Baa3 the rating on the Special Obligation Bonds, Series 2011A&B issued by the Jackson Redevelopment Authority but secured by an unconditional pledge of the city's general fund. The outlook remains negative.
RATINGS RATIONALE
The downgrade reflects the city's support of and exposure to the stressed City of Jackson Water and Sewer Enterprise (Ba2 negative), which required an emergency loan from the city's general fund in order to meet the system's September 1 debt service payment. The rating also incorporates the city's stabilizing financial position after a multi-year period of financial narrowing. The rating considers Jackson's robust and stable tax base that serves as the capital of the State of Mississippi (Aa2 negative), its low wealth and income indicators of residents, and the city's elevated debt and pension burdens.
The Ba1 rating on the city's outstanding Series 2011A and 2011B bonds reflects the more limited source of repayment for the bonds, which are secured by an unconditional and irrevocable pledge of the city's general fund.
RATING OUTLOOK
The negative outlook reflects our expectation that the city will remain exposed to its financially stressed water and sewer enterprise system. We expect the city's water and sewer system to be pressured operationally and financially in the near term and challenged by significant capital needs over the long term. The negative outlook reflects the significant ongoing operational and financial risk posed to the city's general governmental operations by its water and sewer enterprise.
The negative outlook further reflects the growing debt service of the city through fiscal year 2020.
FACTORS THAT COULD LEAD TO AN UPGRADE
Continued stabilization of financial position despite near-term escalation of debt service
Strengthened operational and financial position of water and sewer enterprise, reducing potential risk to the city's general fund
Elimination of governmental support for enterprise operations
Reduction of debt and pension burdens
Material expansion of taxable base
FACTORS THAT COULD LEAD TO A DOWNGRADE
Continued support of enterprise operations
Erosion of financial reserves or liquidity
Material growth to debt or pension burdens
Deterioration of taxable base
LEGAL SECURITY
The general obligation bonds are secured by an annual ad valorem tax, levied against all taxable property in the city without legal limitation as to rate or amount.
Series 2011 A and B bonds are an unconditional, irrevocable obligation of the city's general fund per a contribution agreement with the Jackson Redevelopment Authority.
USE OF PROCEEDS
Not applicable
PROFILE
The City of Jackson is located in central Mississippi and serves as the state capital and the county seat for Hinds County (Aa3).
METHODOLOGY
The principal methodology used in the general obligation ratings was US Local Government General Obligation Debt published in December 2016. The principal methodology used in the lease ratings was Lease, Appropriation, Moral Obligation and Comparable Debt of US State and Local Governments published in July 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
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.
Joseph Manoleas
Lead Analyst
Regional PFG Northeast
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Dan Seymour
Additional Contact
Rtgs And Proc Ovsght
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Thursday, September 13, 2018
Moody's Downgrades Jackson Debt
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32 comments:
Would you own the City of Jackson any of your money?
No one in their right mind would buy a Jackson bond no matter how high the rate of interest.
I don't fully understand all the terms and ratings in this report, but it appears that things aren't too rosy for Jackson's financial future.
Taxable base deteriorates more every single day.
What is the definition in their mind of an "enterprise operation"?
But Mayor Chockbaby thinks he needs an additional 300,000 for public relations spending in his office!
Time for the City to realize it needs to get hold of its spending for all the unnecessary cap and focus on the real priorities - infrastructure, police, fire. Quit spending on these wonderful social experiments, zoos, multiple libraries, golf courses, private group museums. Keep the focus on the necessity, not the radical or the nice. But - that won't happen. Another downgrade coming soon.
Lead Analyst Joseph Manoleas ... I wonder what he thought when he was compiling the numbers for Jackson from his office in New York.
The city's remedy will be to sell some more bonds.
11:46 - You can 'compile numbers' from any location on the planet. You don't have to be in the hood to come up with this report.
Meanwhile: Will one of you armchair money-managers please tell us which of these solutions is anywhere near possible for the city of Jackson?
"FACTORS THAT COULD LEAD TO AN UPGRADE
Continued stabilization of financial position despite near-term escalation of debt service. (Find a pot of gold at the end of a rainbow).
Strengthened operational and financial position of water and sewer enterprise, reducing potential risk to the city's general fund. (Magically transform all the unpaid water bills into cash)
Elimination of governmental support for enterprise operations. (Close the fucking zoo and eliminate the city employment office)
Reduction of debt and pension burdens. (Pay off some bills and lay off some fat)
Material expansion of taxable base. (Import some working people into the city and require that they buy property)
I can't think of ANYTHING that's been upgraded in Jackson in last 5-10 years?
Maybe the city should start selling timber futures. So what if they're fake? All you get is a slap on the wrist, a few months confined to your JCC/CCJ home, and a single charge of fraud.
@ September 13, 2018 at 12:30 PM
Well said!
Ashby Foote made a post on Facebook asking his constituents what can be done to address the obesity issue in Mississippi, what can be done in NE Jackson.
The level of doom gloom was out of control.
Once again, people on here showing why Mississippi is ranked at the bottom of everything. Too many people want to complain, not enough wanting to do anything to solve the problems around here. SMH
1230 - Enterprise operations are those that raise money for their operation, specifically the water/sewer dept. The golf courses and a few other operations mat be included but they are so mnor it's not much of a drop in a big hucket. Not to say quitting subsidizing of things like the zoo would be a good start, just in a different category.
My answer to your (possibly rhetorical) question is the 2nd - collections at the water/sewer department. No way all the past dues will be collected but over the next two years I do expect to see this operation back on track. (Otherwise, the city will have to be shut down and taken over - which may be required anyway.) With the billing system finally straightened out and a reasonable collection policy in place, I have hope that one is possible. I see little hope for the others ever happenong.
We just needs to borrow some mo money and fix up dem houses around dat zoo.
Just a guess here...........I think the tax base WILL continue to deteriate.
The sale of water is a money maker every place in the world except for Jackson.
Actually, no 451. Many public utility systems are going broke, and selling out to private companies. You would think that they would be automatic money makers for cities but that omits the fact that they too often are being run as governmental units, not as the businesses that they should be. Local politics can ruin the best of them.
"No way all the past dues will be collected but over the next two years I do expect to see this operation back on track."
2:27....will you please take a deep breath and give us one thing that leads you to that conclusion? When a train jumps the track and runs in the ditch, there has to be some reason to suspect it might right itself and run properly 'over the next two years'.
@4:51
You are wrong. The sale of water IS a money maker in Jackson...for Kroger, Walmart etc...
I have a multi-faceted solution:
Shove the entire Jackson metro area into the Rez. Solves the City of Jackson problem, the salvinia threat, the damned dam situation, the zoo problem, the JPS problem, the water and sewer problem, the pothole problem, the Taterhood Parkway problem, the legislature problem, etc., etc., etc.
Kenny Stokes is already on TV complaining that it is unfair to collect from the
poor people and that the City should not turn anyone’s water off for non-payment.
Anyone who thinks the City will collect or turn anyone’s water off is dilutional.
Jackson is a dying city.
5:48, the city finally has put someone in charge of that facility that knows how to run a business, is not a political hack, and realizes the necessity of actually attacking the problem rather than ignoring it. And, I believe, that the Mayor and a majority of the Council, recognize that although they might not like it, their political lives revolves on him being successful in doing this.
AND, a great many of the past dues are owed by people that are actually willing and able to pay the bill - once they receive it. Others will have the choice of moving or having their water cut off.
That's why I'm led to that conclusion - and I didn't need a very deep breath to get there.
852, Kennuf can complain all he wants - the city has no choice except to implement the shutoff policy to meet their loan covenants. Kennuf can play to his constituents all he wants, he doesn't have the power or votes on the council to stop it.
When I go to Walmart or Kroger- they always make me pay the whole bill- not just part of it.
Now we know the reason the city was in such of a big hurry to pass the recent bond issue which couldn't wait until the next statewide voting date. I am sure the holders of those bonds would love to get their ill-fated investments back.
1044, your theory may be correct, but your fact is not. Passing the bond issue does not equate to selling the bonds. Haven't checked on it, but I would bet a stack of timber contracts that those JPS bonds have not been issued or sold yet.
NOTHING in the loan covenants demands the specific act of individual customer water shutoff.
1:00, do you know which 'loan covenants' are being referenced? I believe a little investigation may prove you to be in error.
The problem is that many residents run up a high water bill and then go back to the water department and opens a new account in a different name.
Prove it 4:35 PM.
Jackson, MS is a fine example of why a Democracy cannot last. As soon as its citizens become dumbed down enough to elect a Chokwe Lumumba, they bankrupt it!
I haven't read Jackson's loan agreements, but I do work at a central Mississippi water provider and can tell you that our loan documents absolutely require that we have a policy and procedure for cutting off nonpayers.
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