Moody's Investors Service has downgraded the city of Jackson's general obligation unlimited tax bonds to A3 from Aa2.
A Moody's release cites Jackson's fiscal situation: "The downgrade reflects the city's deteriorating financial position resulting from significant operating deficit in fiscal 2014 expected to persist through fiscal 2016. The city estimates that for fiscal 2015, which ended September 30, 2015, General Fund reserves declined by nearly 60 percent compared to audited fiscal 2014 reserves.
"The decline represents a departure from the city's prior financial performance and stems from inadequate revenues, despite significant legal flexibility to increase property tax rates. The downgrade also reflects the city's recent debt restructuring to balance the fiscal 2016 operating budget."
The move also "reflects adverse socioeconomic trends, including population outmigration, declining wealth levels, and high poverty rate. The rating further considers the city's sizable tax base and elevated debt and pension burdens, with significant infrastructure needs that will require substantial capital investment over the next fifteen years."
WHAT COULD MAKE THE RATING GO UP (or, to remove negative outlook):
• Established trend of structurally balanced operations
• Rebuilding of reserves to adequate levels
• Substantial tax base growth
• Significant improvement in socioeconomic indices
WHAT COULD MAKE THE RATING GO DOWN:
• Further financial deterioration beyond what the city currently estimates for fiscal 2015
• Continued reliance on one-time measures and debt restructuring to balance future budgets
• Deterioration of local economic conditions that result in further revenue declines