S&P Global downgrades Selma’s credit rating

Published 2:36 pm Thursday, December 13, 2018

The city of Selma’s credit rating has been downgraded, according to numbers released from S&P Global Ratings on Thursday.

S&P lowered its underlying rating (SPUR) on Selma’s general obligation (GO) bonds and warrants three notches from BB+ to BBB+, giving it a negative outlook.  The rating is due to the city’s weak management, weak liquidity, weak budgetary performance, weak budgetary flexibility, weak economy, adequate debt and contingent liability position and strong institutional framework score.

In a release, S&P Global Ratings credit analyst Tiffany Tribbitt said the city’s financial issues are due to disagreements between Mayor Darrio Melton and the City Council over how to handle the issue. S&P also attributes Selma’s inability to generate sufficient revenues stems from its very weak economy.

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“The downgrade reflects the city’s continued structural imbalance, without a current agreement among city officials on how to correct it,” Tribbitt said. “This is in part due to ongoing political instability, with the council and mayor unable to reach agreement on a budget that makes necessary structural adjustments to align revenues with expenditures.”

Melton didn’t appear to be surprised at the S&P’s evaluation of Selma.

“The S&P Report is very revealing in and of itself,” Melton said. “It reveals what I have been saying for over the past two years. For over two years, the mayor’s office have shown the downward spiral of the city’s finances and have offered multiple solutions to correct this trend.”

A recent audit showed the city had a $1 million deficit from last year and layoff of 68 city employees also contributed to the poor rating.

“Because of continued deficits, Selma’s reserve position has weakened, and its cash position is becoming pressured,” Tribbitt said. “While it has taken steps and implementing a hiring freeze, in our view it remains vulnerable to economic conditions disrupting stable sales tax revenues. Given Selma’s deteriorating financial position, we believe debt service payments could become increasingly vulnerable to nonpayment should economic conditions worsen and revenues the city rely on for operations fall.”

Council President Corey Bowie said the council wants to look at the city’s financial records, then try to resolve the situation. The city’s finances have dominated council meetings over the last several months.

“We as a Council has requested financial transparency so we can maintain a good credit rating,” Bowie said. “A disruptive environment adds to a declining credit rating.”

S&P predicts Selma’s revenue flow will slightly improve over the next few months from collecting ad valorem taxes and business licenses.

Melton said he hopes the council and citizens unite to help solve the dilemma.

“It is time to fix this crisis, and I hope the City Council and the people of Selma will stand beside common-sense solutions and reject political posturing,” Melton said.