County’s bond rating not upPublished 12:04am Tuesday, January 31, 2012
NATCHEZ — When Moody’s Investor’s Service officially announced its rating update on Adams County’s bond last week, it wasn’t exactly the resounding endorsement for which the county was hoping.
But it was still an indication that the agency sees some improvement.
The Adams County Board of Supervisors were given word of a change in their bond rating by their financial advisor, Demery Grubbs, Wednesday, before it was published on Moody’s website. Grubbs said the county had been upgraded from “non-investment grade” to “investment grade.”
However, Grubbs said Monday a miscommunication occurred last week between Moody’s and his company, Government Consultants Inc. of Jackson.
In fact, Moody’s released a statement Thursday stating that it had re-affirmed the bond rating it had given the county in 2010 — Ba1, which reflected downgrade from previous years.
So the county’s bond rating remains at “non-investment grade,” Grubbs said.
While the rating remains the same, the financial rating company had changed the outlook on the county’s bond obligations from “negative” to “positive.”
Grubbs said every rating includes a positive or negative outlook. A negative outlook indicates a lack of any improvement.
“A positive indication (means Moody’s) sees movement, and it’s a move in the next step up the latter,” Grubbs said.
Grubbs said the shift toward a positive outlook makes a good case to have the firm reevaluate the county’s rating at the end of this fiscal year on October 1.
“(A positive outlook) is a real good reason to go back and request an additional review,” Grubbs said. “It’s hard to go back when you have a negative outlook.”
The Moody’s statement says the bond rating, “reflects the county’s weak financial management practices as demonstrated by eight years of deficit spending.” The years the county had a deficit were 2000 to 2008. The statement also mentions the fact that the county had negative fund balances from 2003 to 2009 as a reason for the downgrade.
The reason the outlook was changed from negative to positive was because in fiscal years 2009 and 2010 the county operated positive budgets and had positive ending balances.
The statement also says that the positive outlook, “reflects the possibility that improved financial management will be considered.”
While Moody’s said that it considers the county’s history of deficit spending and an “outsized enterprise risk posed by (the) county-owned hospital” to be weaknesses, it also said Adams County’s strengths were a relatively stable local economy and a low debt burden.
Adams County Board of Supervisors President Darryl Grennell said Monday he was under the impression that the county’s rating had been upgraded last week, and he discovered the rating was unchanged Monday.
Grennell said the years of deficit spending happened as supervisors tried to cope with significantly decreasing revenue during a time when the local economy was shrinking. The closure of major industry affected the tax base, he said, and during that time the supervisors avoided any substantial tax increases.
After receiving the credit downgrade in 2010, the board has been conscientious about the year-end balances, Grennell said.
“The board committed itself to improving the end of year cash balances to get out of that poor rating we had,” he said. “One of the things that helped us in the past couple of years was the (new Corrections Corporation of America) prison.
“That had new dollars, new revenues coming in.”
The Moody’s statement said that returning to past patterns, as well as refusing to adopt improved financial management policies, could drive the rating down. It also said debt from supporting the hospital, if it exceeds current expectations, could affect the rating negatively.
What could bring the rating up would be for the county to establish a trend of balanced operations and implementation of improved financial practices, the statement said.
County Administrator Joe Murray said the county has curtailed spending as much as it can, and that the county will retire more than $900,000 in debt at the end of the fiscal year.
“We have — and are working to have — more of an awareness of where we were and where we need to be,” Murray said. “We are trying to do everything we can to be sure we are watching out for the taxpayers’ well-being and keep the county healthy in regard to our finances.”