Rocky Mount, North Carolina's issuer and special tax ratings were downgraded two notches to A1 from Aa2 by Moody's Ratings Wednesday, following the state's Local Government Commission voicing grave concerns about its finances a week earlier.
Moody's also placed the new rating on review for a downgrade.
The agency said the downgrade "reflects a significant decline in the city's financial reserves driven by structurally imbalanced operations in FY 2025."
Unaudited figures for fiscal 2025 show that unrestricted liquidity declined to less than 11% of revenue from over 30% in fiscal 2024, Moody's reported. The city projects further moderate declines in its reserves in the current fiscal year. It is currently drafting its fiscal 2027 budget.
The city had $80.2 million in debt outstanding as of the end of fiscal 2024.
Poor government decisions are a "key driver" of the downgrade. The city has implemented corrective measures, Moody's said.
The ratings "reflects the city's sound local economy, reflected by its growing tax base, and manageable long-term liabilities that are unlikely to increase given an absence of near-term plans for additional debt," Moody's said.
"The ratings have been placed under review for further downgrade pending the finalization of the city's FY 2025 audit and additional information on the city's strategy and specific plans to achieve structurally balanced operations and restore reserves," Moody's said.
"The City of Rocky Mount has reduced its labor force, reduced CapEx expenditures as well as operational costs," Rocky Mount Mayor Sandy Roberson told The Bond Buyer in early April. "These reductions have given us a projected positive cash flow going forward. We do not anticipate missing any debt payments. We will continue to explore and execute additional budget cuts as we develop the 2027 City Budget."
Fitch Ratings has an AA-minus rating for the city's issuer default rating and for the special obligation debt, both with negative outlooks.
Earlier this month, the North Carolina Local Government Commission
Roberson didn't respond to a request for a comment on Moody's action.
