BRADENTON, Fla. - Jackson, Miss.'s water and sewer revenue bonds tumbled four notches on S&P Global Ratings' scale partly due to the lack of initiatives to improve revenues.
S&P said Tuesday that it lowered ratings on the bonds to BBB from A-plus on about $273 million in outstanding debt. The outlook is stable.
The BBB rating was assigned to the upcoming sale of water and sewer system revenue bonds to refund a portion of the system's debt issued in 2005.
The rating reflects a trend in the system's "significantly weaker" debt service coverage levels, which fell to 0.5 times in fiscal 2013 and remained thin at 1.16 times in 2015, in addition to continued pressures on operations from increasing capital needs, according to analyst Oladunni Ososami.
"It is our opinion that coverage levels will remain vulnerable in 2016 and 2017 without initiatives to significantly improve the system's revenues through rate adjustments, other revenue enhancements, or expense controls," Ososami said.
Immediate operating pressures on the system include revenue collection challenges and looming additional debt to fund significant capital costs stemming from a 2013 consent decree and other environmental concerns, S&P said.
In July, S&P lowered its long-term rating on Jackson's general obligation bonds to A-plus from AA-minus, and said the outlook is negative.
Jackson, the state capital, saw weaker-than-projected budget performance in fiscal 2015 beyond what was estimated, and anticipated budget "softness" to continue in fiscal 2016 despite initiatives to reverse negative performance, S&P said.
On Aug. 17, Moody's Investors Service cut Jackson's GOs to Baa2 from A3 citing the city's "failure to increase revenues" as the cause of structural budget imbalance.
Moody's also downgraded the city's water and sewer revenue bonds three notches to Baa3 from A3.