WORLD

US cities struggle to raise funds as shortage of accountants hits credit ratings

The municipality of Marion had planned to finance a new $10-million firehouse with a bond deal later this year. But that project and others are on pause because the city north of Columbus, Ohio, does not have a credit rating.

It is among the 64 local governments and utility systems that S&P Global Ratings withdrew ratings for this month for failing to file financial information on time. In March, the company put Marion and 148 other entities on a negative credit watch.

The withdrawal is “catastrophic,” notes Miranda Meginness, Marion’s auditor. “It is hard for us to figure out how to go forward.” 

A growing shortage of accountants has exacerbated issues for Marion and plagued dozens of cities and counties across the US. Marion saw its general obligation debt rating downgraded two notches in June and has struggled to file its financials on time. Other municipalities have recently seen their bond ratings deteriorate or disappear, threatening their ability to finance projects and borrow at affordable interest rates. 

Investors are reliant on ratings and need up-to-date information on their holdings. During times of economic uncertainty, investors pay even more attention to underlying credit because any issues can drive bond performance, points out Jonathan Mondillo, head of North American fixed income at investment company abrdn. 

Even high-quality municipalities have had their ratings dropped. Dellwood, Missouri, a city north of St Louis with a population of 5,000 and a full-time municipal staff of 11, has lost its A-rating from S&P. City Administrator Terry Wilson says that the cause is a backlog of work due to staffing issues at the city’s external auditing firm. 

Report By