Moody’s Rankings downgraded Manhattan, Kansas, bonds to A1 from Aa3 within the wake of a tardy audit and deteriorating funds.
A tardy annual audit and deteriorating funds led Moody’s Rankings to downgrade the issuer and general obligation rating for Manhattan, Kansas, to A1 from Aa3 and warn the rating might be lowered further and even withdrawn.
The rating agency took the motion on Friday after placing the town under review Oct. 2 for “lack of sufficient information.” At the moment, the town had yet to file its fiscal 2022 audited financial report, which was subsequently posted Oct. 9 on the Municipal Securities Rulemaking Board’s EMMA website, nearly 650 days after the fiscal yr ended on Dec. 31, 2022.
“The downgrade is basically resulting from the town’s contracting financial position coupled with weaker governance stemming from its recent struggles to supply timely audited financial information,” Moody’s said in a report.
It added that the rating might be withdrawn if Manhattan fails to release substantially accomplished financial statements for fiscal 2023 by the top of January.
Manhattan City Manager Danielle Dulin said Monday the town intends to satisfy that deadline.
“Town of Manhattan is committed to maintaining a powerful financial position and is actively addressing the challenges reflected within the recent downgrade of the bond rating to A1 from Aa3,” Dulin said in an announcement. “We recognize that while an A1 rating still represents a high-quality bond, it reflects areas of concern that have to be addressed.”
A report this yr from the University of Illinois-Chicago and Merritt Research Services found the median timing for the completion of municipal bond issuer financial audits increased 10.5% to 168 days for fiscal 2022 from 152 days for fiscal 2011. For cities, the median rose to 182 days from 173 days.
Moody’s, which placed Manhattan’s A1 rating under review for a possible additional downgrade, said the town ended fiscal 2022 with an available fund balance ratio of about 13.3%, “but anticipated general fund deficits in fiscal 2023 and 2024 are likely to scale back available operating reserves to well below 10% of revenue.”
“Should the fiscal 2023 audited results or fiscal 2024 unaudited performance be weaker than anticipated, downward motion is probably going,” the report said.
Town of 53,682 has about $290 million of outstanding debt, in response to Moody’s.
Town last sold debt within the municipal market earlier this yr with a $53.4 million general obligation and temporary note deal priced by Piper Sandler.
The debt was rated AA by S&P Global Rankings based on Construct America Mutual Assurance Company insurance.
The official statement dated May 16 said completion of the town’s fiscal 2022 audited financial statements was delayed resulting from “city and external auditor staff shortages.”