One day after Moody’s Investors Service announced it was considering a downgrade to the city’s credit rating, Mayor Sandy Stimpson told the City Council he hopes the administration can minimize the impact it may have on the city’s borrowing power.
According to the firm, the city’s issuer and General Obligation Limited Tax (GOLT) ratings are currently under review. Approximately $266 million in rated GOLT debt is affected, according to Moody’s, which cited “a rapid deterioration in General Fund liquidity and reserves during fiscal 2012 and 2013, which has been exacerbated by continued increases in health care and pension costs as well as exposure to economically sensitive sales tax revenues, a portion of which requires reauthorization every few years.”
Stimpson said the agency was tipped off by an audited financial statement the city recently posted on its website and Moody’s response is “consistent with concerns raised by his administration during his successful effort to amend the fiscal 2014 budget.”
While Moody’s acknowledged the city maintains additional liquidity and reserves in various funds outside the General Fund, “its ability to access these resources for operations is uncertain given competing capital needs, particularly those associated with preparing a new Airbus facility for occupancy.”
Finance Director Paul Wesch called the review a “serious matter” and said full cooperation from the city may not be enough to prevent the downgrade.
“Two agencies, Moody’s and S&P, provide ratings that are not only important to issue bonds and warrants for private debt, but when the credit rating goes down those bonds get less valuable,” he said. “It impacts us when we want to get a good interest rate.”
Wesch said while the review is focused on the past, the firm has asked the administration “numerous” questions about financial prospects in 2015 and beyond. He said Moody’s 60-day review period is longer than most cases but no matter how it concludes, he hopes to establish a better working relationship with the firm to meet their expectations and improve the rating in the future.
Mobile’s current Aa2 rating is defined as “high quality and subject to very low credit risk,” according to the firm. A lower rating would suggest lower quality or greater risk, depending on adjustments and would be subject to reevaluation after two years.
THE RETURN OF SAM JONES?
Former Mayor Sam Jones may return to public life after City Councilman Fred Richardson nominated him to a six-year appointment on the board of the Mobile Area Water and Sewer System, which supplies more than 200,000 customers in Mobile County.
Jones may become the second member of his administration to join the board, after his former assistant Barbara Drummond was nominated by Councilman C.J. Small in January. The board pays its commissioners $1,100 per month.
Richardson said little about the nomination after the April 29 city council meeting, where a vote on the appointment was held over until next week. Questions about Drummond’s appointment on the board caused division on the council at the time, although it was eventually approved by a 6-1 vote.
Councilwoman Bess Rich, the only holdout, cited professional disagreements for her vote against Drummond, but reserved comments about Jones.
“I have my concerns but I’ll articulate them when we vote on it next week,” she said.
Richardson said Jones’ familiarity with the city made him an ideal candidate to replace outgoing commissioner Leevones Fisher, whom he appointed in 2008.
“He was born and raised here, he was the mayor of this city for eight years, his whole life he has been a positive force,” Richardson said. “I haven’t heard anything negative about Sam Jones and I think he’ll do a good job.”
ANN STREET RESTORATION
Midtown drivers may spend a little less on suspension repairs after the city completes the first phase of restoration to Ann Street, which Councilman Small called “one of the worst streets in the city.” Expected to take 8-9 months, the council approved $2.48 million worth of contracts to repair drainage and repave Ann Street along two blocks in front of Craighead Elementary School south of Government Street.
Small pledged to work with the administration to secure funding to repair the rest of the road, a heavily-traveled north-south route between Interstate 10 and Springhill Avenue.
The council is also considering a $15,000 allocation to install a handicapped ramp at the Quigley House, a city-owned property that is currently offered rent free to the Distinguished Young Women program for its headquarters. City architect Brad Christensen said ADA compliance throughout the city is usually complaint-driven and in this case, the organization requested the ramp.
Chief of Staff Colby Cooper pointed out that Distinguished Young Women also received a $87,000 performance contract with the city and additional requests are often accompanied by a reminder of a program’s economic impact. Cooper said the DYW program was one of the first to be denied a fee waiver for renting out the Mobile Civic Center under the administration’s new policy to rein in the waivers, which eliminated $3.5 million in potential revenue last year.
Separately, the council also committed $71,600 toward a grant to improve ADA compliance on sidewalks in the Central Business District. Next week, the council is scheduled to revisit the approval of the Blue Creek Coal Terminal, the subject of a four-hour appeals hearing April 22.