NEOSHO, Mo. —
The credit rating service Standard & Poor’s has assigned the city of Neosho an ‘A’ rating, amounting to a vote of confidence in the city’s once troubled finances, according to Mayor Richard Davidson.
“It was certainly a pleasant surprise when the rating came in above of what we were expecting,” Davidson said Monday.
The town’s finance director, Jane Obert, was a little less reserved.
“We’re ecstatic about it,” she said.
Standard & Poor’s has been in existence for over 150 years and has been issuing credit ratings on government entities for over 50 years.
The company — which has offices in 23 countries — rates the financial health of companies, countries, municipalities, and investment funds using a scale with a ‘AAA’ rating representing the most sound financial condition and a ‘D’ rating representing the most precarious.
City Manager Troy Royer said that city leaders had hoped for a ‘BBB’ or an ‘A-’ rating, but were excited to see the ‘A’ rating, which will make borrowing more affordable for Neosho taxpayers.
“Every dollar counts when you’re trying to bring a city back from financial stress,” he said. “Having one of the top-rated worldwide rating corporations give us an A is just outstanding.”
Royer said the ‘A’ rating would have seemed inconceivable in 2009 when city leaders were facing a $1 million budget shortfall.
“If we would have gotten a rating a few years back during all of the financial problems we were having here, we would have probably been in the low Cs, which means you’re vulnerable to the market and anything else in the economy,” he said.
Neosho’s financial crisis came to light when former City Manager Jan Blase acknowledged that the city had misused a state loan and other restricted money to make payroll and to pay other city bills.
Further borrowing for the general fund from other sources, including hotel-motel tax revenue, and water and sewer funds, also came to light. By the end of the fiscal year in September 2010, city officials were bracing for a shortfall in the budget of nearly $1 million. City officials laid off 25 percent of the city’s work force and cut other spending during the fall of 2010.
Blase and Bob Blackwood, former finance director, ultimately were fired by the council, and each was fined in court on a misdemeanor count of official misconduct.
Obert, who was hired as finance director last September, said S&P looked at the city’s fund balances and its debt to establish a financial trend. She said the city’s general fund balance has increased from negative $1 million in 2009 to a more than $2 million surplus as of May.
In addition to cash-on-hand, Obert said S&P looks at internal financial controls that are in place. She said those controls — if in place a few years ago — could have allowed past councils to see the impending crisis and take appropriate action to prevent it.
“We reconcile all bank accounts on a monthly basis and supply that information to the City Council,” she said. “The City Council was not receiving monthly financial statements. If they had that information three years ago, they would have seen that the general fund was getting smaller and smaller, but they didn’t have those basic reports which are the first line of internal controls for a city government.”
Royer said the city could start reaping benefits from the rating as soon as today in connection with the town’s current debt obligations.
Credit reports
According to the Standard and Poor’s company website, credit reports are “forward-looking opinions about credit risk” and “express the agency’s opinion about the ability of an issuer to meet its financial obligations in full and on time.”
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