JACKSON, Mississippi — Credit rating company Moody's Investors Service has downgraded its rating for Jackson's water and sewer system revenue bonds.
That could mean higher water rates to cover higher interest, The Clarion-Ledger (http://on.thec-l.com/1FPsaQm) reported.
City officials had said even before the rating change that the city would probably have to raise water rates because of a $12 million revenue deficit compared to debt. Additionally, the city's water department is losing about 40 percent of its water within the existing infrastructure. Both the deficit and the water contributed to the second downgrade in 18 months.
Moody's dropped the rating from A1 to A2 on Nov. 25. In May 2013, it dropped the rating from Aa3 to A1.
Moody's classifies the A2 rating as an "upper-medium grade and low credit risk."
"While this ratings downgrade is disappointing to us, we fully understand the factors considered by the rating agency in their decision and these were issues that concerned us as an administration," Jackson Public Works Director Kishia Powell said in a statement.
Other contributing factors to the downgrade include "weak management practices evident in poor revenue projections, significant water loss and less than sum sufficient debt service coverage in fiscal 2013," the Moody's report states.
"Over the past several months, the city has taken aggressive steps in anticipation of the Moody's review," Mayor Tony Yarber said. "Those actions included increasing water rates and sales tax, overhauling the personnel management of the Department of Public Works and the forensic auditing of the system and contracts."
The city of Jackson approved a $200,000 contract with Washington-based Raftelis Financial Consultants for a water-sewer rate study and financial plan — something city officials said Tuesday will help while assessing the downgrade.
Information from: The Clarion-Ledger, http://www.clarionledger.com