Moody's Investor Service issued the following statement yesterday:
Moody's downgrades to A3 the City of Jackson, MS's GOULT debt; outlook revised to negative
Downgrades General Fund unconditional pledge to Baa1; assigns A3 to $19.3M Series 2015 A & B GOULT
Issue: General Obligation Refunding Bonds, Series 2015A; Rating: A3; Sale Amount: $19,125,000 Expected Sale Date: 12/01/2015; Rating Description: General Obligation
Issue: Taxable General Obligation Refunding Bonds, Series 2015B; Rating: A3; Sale Amount: $175,000; Expected Sale Date: 12/01/2015; Rating Description: General Obligation
Opinion
Moody's Investors Service has downgraded to A3 from Aa2 the City of Jackson, MS's general obligation unlimited tax bonds, and assigned an A3 rating to $19.125 million General Obligation Refunding Bonds, Series 2015A and $175,000 Taxable General Obligation Refunding Bonds, Series 2015B. Post sale, Moody's will rate $128.4 million of the city's outstanding general obligation unlimited tax debt. Concurrently, Moody's has also downgraded to Baa1 from Aa3 $8.6 million in outstanding Series 2011 A and B bonds, backed by an unconditional pledge of the city's general fund. The outlook has been revised to negative.
(Moody's downgraded this issue by four levels.)
SUMMARY RATING RATIONALE
The downgrade reflects the city's deteriorating financial position resulting from significant operating deficit in fiscal 2014 expected to persist through fiscal 2016. The city estimates that for fiscal 2015, which ended September 30, 2015, General Fund reserves declined by nearly 60% compared to audited fiscal 2014 reserves. The decline represents a departure from the city's prior financial performance and stems from inadequate revenues, despite significant legal flexibility to increase property tax rates. The downgrade also reflects the city's recent debt restructuring to balance the fiscal 2016 operating budget. Although the city's general obligation debt is secured by an unlimited ad valorem tax pledge, city officials did not raise property taxes but rather utilized the restructuring to extend the repayment on certain principal maturities to fiscal 2020-2036 from 2016-2019.
The A3 GOULT rating also reflects adverse socioeconomic trends, including population outmigration, declining wealth levels, and high poverty rate. The rating further considers the city's sizeable tax base and elevated debt and pension burdens, with significant infrastructure needs that will require substantial capital investment over the next fifteen years.
The Baa1 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 appropriation pledge of the city's general fund.
OUTLOOK
The negative outlook reflects the potential for further deterioration of the city's financial position given the budgeted fiscal 2016 deficit. It also incorporates the lack of clarity regarding resources to close the expected budget gaps, which could potentially erode all available reserves. Future reviews will focus on management's ability to balance the budget and generate sufficient revenues to improve the balance sheet.
WHAT COULD MAKE THE RATING GO UP (remove negative outlook)
• Established trend of structurally balanced operations
• Rebuilding of reserves to adequate levels
• Substantial tax base growth
• Significant improvement in socioeconomic indices
WHAT COULD MAKE THE RATING GO DOWN
• Further financial deterioration beyond what the city currently estimates for fiscal 2015
• Continued reliance on one-time measures and debt restructuring to balance future budgets
• Deterioration of local economic conditions that result in further revenue declines
OBLIGOR PROFILE
City of Jackson is located in central Mississippi and is the county seat for Hinds County (Aa2).
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
Proceeds of the Series 2015 bonds will be used to refinance and restructure a portion of the city's outstanding debt. The bonds are being issued to achieve debt service savings of approximately $16 million over fiscal years 2016-2019, while at the same time extending the final maturity to 2036 from 2019. The transaction is expected to result in a net present value loss of approximately $1 million....
31 comments:
Well, the wide-eyed Pollyannas in don't recognize that the ship is sinking but you can't fool the green eye-shade wearers at Moody's.
Let the delusional rationalizations from the Whole Foods crowd commence (especially that Detroit booster from earlier today)
Boy howdee....the haters gonna love this news!
### Metro Ad Valorem Millage Rates (2013-2014) ###
Jackson = 178.80 mils
Edwards = 150.33 mils
Clinton = 147.76 mils
Canton = 144.84 mils
Bolton = 139.63 mils
Byram = 137.43 mils
Terry = 131.18 mils
---> AVERAGE = 131.0625 mils <---
Raymond = 128.95 mils
Pearl = 128.18 mils
Flora = 126.18 mils
Madison = 121.48 mils
Brandon = 118.66 mils
Ridgeland = 112.70 mils
Florence = 112.56 mils
Flowood = 109.66 mils
Richland = 108.66 mils
*INCLUDES City, County & School District
Is it hateful to point out reality?
If you get cancer and the doctor tells you the diagnosis...is the doctor hateful?
Fact is that this city cannot cut spending enough and raise taxes enough to run the place as it currently exists....much less with the needed improvements to the infrastructure.
So when the same dude who helped Detroit file bankruptcy shows up....do not be surprised.....as he liquidates...you can say he hates....but he is still gonna have to take the city finances over nonetheless.
Two golf courses. Have to keep them. Planetarium. Won't give it to the state. Municipal Art Gallery and Mynelle Gardens. Keep them on the books too.
They don't want to cut anything or sell anything or shut anything down.
I have been a Jackson resident since 1955, but I gave up about a year ago. My house is for sale, but, alas, no buyers. I wish Jeff Good and his band of merry Fondren lovers well, but the reality is that Jackson is sunk. The financial markets are telling us that homegrown hopes and wishes are pie in the sky. I am afraid Jackson has sunk below the level of any hope of a comeback. The Moody analysis seems to prove that. It's time to pull the plug. Jackson's tax base is so low it can't even think about clawing back.
Was it over when the Germans bombed Pearl Harbor??? Hell no!!!
They don't want to cut anything or sell anything or shut anything down.
[And] their herd of lactating cash cows keeps shrinking, and shrinking, and shrinking.
5:51 Maybe your house just sucks.
5:51 you are a liar. God is watching you. You don't live here, and never have.
7:58, maybe, er, highly likely that supply dwarfs demand.
Never fear…the District at Eastover is almost here!
Chapter 9 cometh.
And don't forget about the zoo.
8:32,3 and 9. Obsessing more than usual tonight? Keep talking to yourself.
When a city's leadership and legal environment cater to non-taxpayers is any of this really a surprise? Houses in Heatherwood look cheap until you add in the costs per child for private school. Meanwhile houses with working school districts in Madison and Rankin county are selling for the same price but without sewage spraying into the street and water bills based on estimates. I want to stay in Jackson, really I do, but this kind of stuff actively drives out people that normally would be the core of a community.
9:00 is another liar.
Moody's downgraded over 1600 city and state bonds this go round. They have downgraded others prior to this.
And, the downgrades are as much about cities and states losing federal funding with budget cuts and infrastructure problems as it is about city management.
It's not great but it's hardly reason to panic.
Please, folks, try to read something about how cities decline and resurge and which cities survive and why. Or just read a history of Richmond. It's a good comparison. Detroit isn't, Richmond is. Being a capitol city historically matters.
" Cheap" is relative. If you can't afford Heatherwood, you will be replaced in time by those who can. Indeed, Jackson will in the next three decades be " gentrified" just like every other city on the north east coast where living inside the city limits is only for the wealthy. Compare housing costs of east coast capitol cities to that of their outlying suburbs to get a hint. PS, my starter house inside the city limits of a capitol city just sold for $600000 and I had paid $60000 for it 30 years ago. My friend's house in the closest suburb is only worth a third more.
I know you all think you are smarter than the " outsiders" investing in Jackson. But, it's always " outsiders" who come into a place on decline, see the opportunity to buy cheap, make money and change the culture overtime. Your choice is whether or not your family in the future will still have any social clout in the State.
Here's another hint: The US population has more than tripled over my lifetime. Rural areas have disappeared. You can't create more land.
7:07 AM
You are wrong.
You cannot create a demand for existing land which is plagued with sewage and water problems and then which has neighbors who do not work but who do suck money from the system and who control the city.
You see....the jail has been overrun by folks who have not the means or the mind to run it.
Now...AFTER the bankruptcy (like Detroit is experiencing) things may change. When the Regions building sells for a dollar. When the Pinnacle building sells for a dollar. When businesses can make money...and jobs can be had.....MAYBE.
Until then.....you have seriously miscalculated what actually exists on the ground. I suggest you go ride around Ellis Avenue a few more time and this time....don't buy the crack.
7:07, your comparison of Jackson to Richmond is laughable and desperate. Your anecdotal use of your $600k starter house in some non-disclosed 'capital city' demonstrates the strain to which you have to stretch to make your point. That doesn't and won't happen in this market. There is nothing new driving money back into Jackson, which is what it takes to reverse the tide.
Good luck Jackson, you are going to need it. Until the people decide to elect officials who actually want to do their job, instead of lining their pockets and the pockets of their friends, Jackson will sink lower. How about moving the fences for the zoo out to the city limits.
There are some economic rules of land ups and downs in prices but what is going on in Jackson is off charts.There is zero way Jackson will ever survive and any investor who think we have seen the bottom is wrong. Just drive through the worst places in the Delta and that is the future of Jackson. The only question is can the metro area make it with a dead central city?
The JPS scholar at 6:43 is a MORON! ..."Was it over when the Germans bombed Pearl Harbor??? Hell no!!!"
Unbelievable!
Dang 10:59! Study yur cultural history. That's a Bluto quote.
Could it be that the attitude of "it's my way or the highway" and the refusal to admit that the 1950-1960's are in the past, is what is bringing Jackson down? The city must conform to the way nearby suburbs are running their successful towns. Race, income levels and schools should not be compared. The inner workings of the government, rules, regulations and enforcement of the same should be copied. The good things will follow.
good points by both sides, but remember, these ratings are still investment grade. not junk.
It is all Ben Allen's fault.
11:13 That's SENATOR Blutarsky to you :-)
Mr. Blutarsky…zero,…point,…zero
7:07, seen your comments here before, and no, Jackson is nothing like Richmond. Fondren isn't the Fan (at best, it's Church Hill), and Eastover is a pale imitation of anything south of Cary St (with the possible exception of Windsor Farms) - and I say that as someone who lives in Jackson and likes both those areas. Where's our Belle Isle, our Shockoe, Maymont, Byrd Park?
10:59:
You're an idiot.
Post a Comment