'Catastrophic:' S&P withdraws bond rating from City of Marion
“Catastrophic” is the term that both Marion Auditor Miranda Meginness and Mayor Scott Schertzer used to describe the news that S&P Global Ratings has withdrawn the city’s bond rating. The action will have an affect on the city's ability to borrow money or obtain federal grants.
Meginness informed the Marion City Council Finance Committee about the action during Monday’s meeting. Previously, S&P had downgraded the city’s bond rating from AA to BB in the wake of the city’s 2020 audit report, which was not completed until May 2022.
The Ohio Auditor of State's Local Government Services conducted the 2020 audit which uncovered numerous issues and detailed three findings for recovery − two of which involved former city auditors Robert Landon III and Kelly Carr. The city’s 2021 financial audit was supposed to have been submitted to the Federal Audit Clearinghouse by Sept. 30, 2022, but that did not happen, only adding to Marion’s woes.
“Late last week I was notified that S&P did withdraw our bond rating,” Meginness said. “With everything being left uncompleted at this point, this was expected. Obviously, it’s not a good turn of events, but we have a plan to come out of it.”
Meginness said that, according to documentation she received from S&P Global Ratings, the company has withdrawn the bond ratings of “various local governments and utility systems” due to the failure of those entities to provide S&P “adequate and timely financial information necessary to maintain surveillance of the ratings in accordance with our applicable criteria and policies. Such financial information includes the 2021 audited financial statements.”
Meginness outlined a “to-do list” of items that her office needs to accomplish in order to begin the process of regaining the city’s bond rating, including completion of the 2021 and 2022 financial audits, implementation of a new bank reconciliation process, and maintaining up to date and accurate financial records moving forward.
According to a report by Bloomberg news service (March 13, 2023), S&P had placed 149 municipalities’ “long-term, underlying and program ratings on a negative credit watch this year because the ratings company hasn’t received 2021 financial statements from the issuers.” The report also noted that the figure was “the most since at least 2018, and materially higher than the prior five-year average of 95 such moves, according to S&P data.”
Schertzer outlined some of the ramifications the withdrawal of Marion’s bond rating could have on the city’s ability to borrow funds or obtain grant funding, noting that the city may have to explore obtaining funding from alternative resources.
“Make no mistake, this is catastrophic,” Schertzer said. “There’s only one more catastrophic thing that could happen and that’s the (Ohio Auditor of State) comes in and runs our books. Council needs to understand how bad this is. Does it jeopardize future capital projects? Absolutely. So now we have to look at the secondary market. We have to look at other options.
“And as was already stated by (Councilman Jeff Gerritsen, 1st Ward) all those options are going to cost the taxpayers more money. We went from a AA to a BB to no rating at all.”
Schertzer noted that while the city’s revenue stream is currently strong, potentially losing access to valuable federal grant funding could have a serious negative impact on the city’s general fund.
“If those federal dollars are ever in jeopardy … then the general fund will be strapped and strained to cover those lost federal dollars in a COPS (Community Oriented Policing Service) grant, in a SAFER (Staffing for Adequate Fire and Emergency Response) grant, FAA grants, transit grants, senior transportation grants at the (Marion) Senior Center,” Schertzer said. “There are a multitude of departments that rely on federal dollars and that’s why it’s so important to make that Federal Audit Clearinghouse deadline on Sept. 30 before the feds decide to do something about it.”
As she has stated previously, Meginness reiterated to the finance committee on Monday that she believes the blame for the current situation the city is facing can be laid at the feet of former Marion Auditor Robert Landon.
“One thing I did want to note as well is that this is the result of the 22 months that Robert Landon was in office and (took) little to no action while he was in office,” Meginness said. “The bank reconciliations are a big part of that. If the bank reconciliations had been done this could have been avoided.
“The majority of the problems with why we’re being so held up right now is the inaccurate record keeping (under Landon’s administration). If we had the records in the appropriate places and the appropriate orders, this wouldn’t be such a problem. The amount of digging my staff and I have had to do to get this completed has led to the delays (in the completion of the city’s financial audits).”
Marion City Council will meet in regular session at 6:30 p.m. on Monday, April 24 at City Hall.
To see city council agendas, go to the City of Marion website www.marionohio.us.
Email: ecarter@gannett.com | Twitter: @AndrewACCarter
This article originally appeared on Marion Star: 'Catastrophic:' S&P withdraws bond rating from City of Marion
