In December 2018, officials from the City of Hattiesburg received an early Christmas present of sorts by learning that the city’s bond rating – which had been suspended in 2017 because of the late completion of the city’s Fiscal Year 2015 audit – had been restored to an initial Aa3 by credit rating firm Moody’s Investor’s Services.
The city received more good news last week when it learned that the bond rating, which allows the city to borrow funds at a competitive rate, as well as apply for grants for certain projects in the city, has been renewed.
“It’s a significant accomplishment, given where so many cities in this country are right now, financially,” Mayor Toby Barker said. “I think as a whole, cities’ bond outlook has gone to negative from Moody’s.
“However, in the case of Hattiesburg, they looked at some of the hard choices we had made in the first part of this pandemic and saw that we would be able to maintain and achieve structural balance in our budget, as well as have sufficient cash reserves, and we were able to keep that Aa3 rating.”
Moody’s assigned the rating to the $15.15 million Special Obligation Bonds, Series 2020 sale, which will primarily be used to fund long-term capital needs, such as the city's first railroad overpass on Hall Avenue. The rating was issued based on the rationale that the city’s active management of revenue and expenses will maintain healthy reserves over the ratings horizon, in addition to “the city's robust tax base, low resident incomes, growing debt burden, and elevated pension burden.”
One example of that would be the five audits that the city has completed since Barker’s administration took over in summer 2017.
“Five audits in three years is a big deal,” Barker said. “The most painful (measure), obviously, was the reduction in force in April (because of COVID-19), when we saw that revenues were not tracking last year; in fact, they were falling 13 percent behind that first month.
“We didn’t know when they would bounce back, so we made the difficult decision to cut 67 positions, 28 of them that were filled. That was the hardest thing for us, because your fellow employees become like family. However, not only have we seen that those cuts allowed us to finish this year by reducing expenses to where we can withstand the sales tax fall, but it also sets us up to where we can pass the first truly balanced budget in 10 years in September.”
With the renewed status, Hattiesburg continues to be ranked in the top five cities in Mississippi in terms of bond rating.
“They’re researching to see who else has that,” Barker said. “I know that we have one Aa2, and that’s Clinton, but Aa3 is a good rating, and we have one of the better tax bases for people who have Aa3.
“While there’s still a lot of work to do, I think that each step builds on the previous one, and we look forward to hopefully passing the first structurally balanced budget in quite some time this fall, which will be the next step in the process.”
When the rating was restored in 2018, it allowed the city to apply for grants for the upcoming Public Safety Complex – which will serve as the new home for Hattiesburg Police Department and municipal court – as well as the upcoming fire station on U.S. 49.
“We would have not been able to get terms that were as favorable as they are if we had not had that (rating); it would not have gone well for us,” Barker said. “Obviously, when you go back into the bond market, they’ll look at you again, because this is a different series.
“And in many ways, we couldn’t have gone at a worse time, because we were in the middle of the pandemic, and the revenue situations for cities are so unsettled right now. However, they noted the hard decisions we made, the progress we’ve made in so many areas. They pointed out some areas we still need to work on – or at least just be aware of – and we maintained that rating.”
Currently, officials will focus on the railroad overpass, for which the federal government is paying 45 percent of the project, with the city paying 55 percent.
“This first round will go to cover the city’s share of building that first overpass,” Barker said. “In the meantime, we’ll also be working on other grant opportunities for the second overpass, and so we’ve applied for Infra Build, and we may go look at another (Competitive Discretionary Grant Program). That’s all with the hopes of solving the downtown train issue once and for all.
“We’re not going to take on bond debt in this city based on basic maintenance; you should not use bond proceeds to go pave roads. Paving roads is a recurring expense, and so you don’t issue long-term debt for things you have to pay for again. So we’re only going to use these funds for these kind of game-changing projects.”
