Mendocino County may lose its rating from a top credit rating agency, due to a lack of sufficient information, according to Moody’s Investors Service.
Last month, Natalie Ramos, a lead analyst with Moody’s, filed a public records request for the fiscal 2022 audit or adequate draft financial documents that Mendocino County needed to respond to by June 30th. Without those materials, she wrote, Moody’s would “consider placing the district’s rating under review for possible withdrawal due to lack of sufficient information.”
Treasurer Tax Collector Auditor Controller Chamisse Cubbison closed the request on June 23 with no responsive documents, writing only that, “The County’s outside audit firm is still completing the fiscal year 2021-22 audit and the preparation of Annual Comprehensive Financial Review. The County does not have a draft of the financial statement available for review. We hope that the reports will be available in the next 30 days.”
CEO Darcie Antle confirmed that no documents were attached to the closed request. Neither Cubbison nor the outside auditor, Clifton Larson Allen, responded to a request for comment.
Moody’s also did not respond to a request for comment. But its online policy for withdrawal of credit ratings lists “Incorrect, insufficient or otherwise inadequate financial information” as its first reason for dropping an entity. Moody’s will withdraw its credit rating if the information available to support it “is insufficient to effectively assess the creditworthiness of the Rated Entity or the obligation; and (ii) such information is unlikely to be available to MIS in the near future.”
Moody’s is one of three credit rating agencies that scores the county’s financial viability, a measurement that is essential to investors or lenders as they calculate their financial risk. The credit rating is also important in determining the interest rates on bonds, which many public institutions rely on to pay for specific projects. According to the State Treasurer’s office, “Underwriters and investors rely upon the credit quality judgment made by the rating agencies (expressed as a credit rating). Some mutual funds, institutions, and investment trusts are restricted by law or by the terms of their organizational documents to buying securities at or above specified credit rating levels…[T]he credit rating is the most important factor in determining the interest rate on bonds relative to other issues sold at the same time.”
Credit rating agencies generally consider Mendocino County to be solidly in the middle range. Muniprofile.com, a municipal transparency website, lists its Moody’s rating at A1. We were unable to confirm that with Moody’s or the CEO’s office. Investopedia characterizes A1 as “upper-medium range and subject to low credit risk.” Fitch Ratings gave the county a grade of A+ last year, which Investopedia pronounces, “the fifth-highest rating a debt issuer or a debt instrument can receive.” And S&P Global Rating raised the county’s credit rating to an AA last year, citing its “improved financial position, supported by enhanced financial management policies and practices.” In a press release at that time, Supervisor Ted Williams said he believed the upgrade would “benefit bottom-line county finance for many years to come.”
But now, after balancing the budget with $7 million in one-time funds and no foreseeable end to negotiations with the county’s largest labor union, Williams is deeply concerned about the county’s credit rating.
Williams has filed his own request for public records to find out if Cubbison shared any financial documents with Moody’s. In an interview, he said, “Mendocino County is deficient in record keeping. The Board of Supervisors is struggling to do its job due to lack of financial acuity provided by the Auditor Controller.”
The county does not appear to be in great financial shape, though documents are sparse. The recently passed budget does not include a COLA for its employees, with the CEO’s office estimating that a 1% COLA would cost the county $1.3 million it doesn’t have. Antle told the Board of Supervisors last month that 33 employees would have to be laid off to pay for a 3% COLA. The assessor’s office has sent out 6,000 notices to taxpayers in an attempt to collect property taxes from up to four years ago. A half million dollars has been set aside to hire more assessors to help increase the county’s tax revenue, but hiring and training have been slow going. The $3.6 million health plan deficit will mostly be covered by ARPA, or the American Rescue Plan Act funds, but the remainder is still $800,000.
It appears that rating agencies typically approach a withdrawal by degrees. In March of this year, The Bond Buyer, an online financial news site, reported that S&P Global Ratings placed 149 bond issuers, including local governments, on CreditWatch “with negative implications,” due to a lack of financial information.
One large business that has also lost its credit rating for a lack of financial information is Twitter. Last year, Fortune reported that S&P downgraded the company after Elon Musk bought it, then withdrew its rating altogether. According to Fortune, “The group of banks that funded the buyout now face the challenge of syndicating the ($13 billion) debt to investors, many of whom use rating companies to determine the risk involved in buying credit.”
There have been other high-profile credit rating withdrawals. S&P’s own industry publication reported in May of this year that it lowered First Republic Bank’s rating from a B+ to a CC before withdrawing its rating. That was after the bank failed and the state appointed the FDIC as a receiver. JPMorgan Chase bought the bank’s assets but did not assume its corporate debt.
Entire countries can also lose their credit ratings. Last year, Reuters reported that the European Union banned credit rating agencies from rating Russia and Russian companies, as part of a sanctions package following the invasion of Ukraine. Moody’s, Fitch, and S&P all withdrew their ratings, rather than lose their licenses in the EU.
Closer to home, Williams reflected that, “It’s kind of a big deal if we lose our credit rating. I hope we don’t have to borrow again.”
What has changed since these reports were issued not so long ago?
Giving Credit Where It Is Due – Anderson Valley Advertiser
MENDOCINO COUNTY RECEIVES A CREDIT RATING INCREASE FROM “AA-” to “AA” FROM S&P GLOBAL RATINGS (“S&P”) | News Releases | Mendocino County, CA
Mendocino County Receives a Credit Rating Increase from ‘AA-‘ to ‘AA’ from S&P Global Ratings – MendoFever – Mendocino County News
Here’s what has changed:
The CEO crack finance team lack of oversight of health plan until it is 3.5M in the hole.
The death moan of cannabis taxes due to a poorly derived ordinance including the extremely high fees to entry and high tax rates causing failing businesses, 2.5M loss last year. Blame the State but it starts with local regulation.
The incompetent County Counsel outsourcing legal functions costing untoward legal fees for Sheriff lawsuit, union negotiations, and to support many other legal opinions, 1M.
The unilateral consolidation of the auditor, controller, treasurer, tax collector with no long-range planning, leaving one department head to handle two financial departments, unknown far reaching financial impacts such as lack of reporting.
All of this is controlled and responsible by the current BOS mismanagement of the county.
There is more to this than just blaming the BOS. The BOS isn’t given the whole story on what is going on inside the depts. I believe most of the BOS heads are fed half truths or omitted important details of the innerworkings by other leadership heads. The BOS is not asking the right questions either. Complacency is definitely happening among the leaders across the board. The County, in general, has promoted people based on nepotism and not so much based on merit or performance. This is why poor performance is all across the board in the first place.
The county suffers from so much conflict of interest which is due to a variety of reasons. Small community nepotism, family members working in multiple depts at the same time (still an ongoing practice), poorly trained and/or inexperienced staff in the field they work in (high turnover), elections dept staff running their own election campaigns (In 2018, out of the three candidates that ran election campaigns for the Assessor’s office, the one over seeing the elections won the Assessor’s election; interesting enough.) You can black market cannabis farmers working in the Cannabis division. This is a joke.
Some of the problems stem from the community itself being too insular and uneducated. The higher legal costs probably come from the higher than normal volumes of lawsuits here due to the poor performance of mgmt. If you haven’t notice the HR director has been vacant for sometime now and probably for a reason though it may be an inconvenient reason. The positions where accountability is required remain in high turnover or often vacant. Director for Cannabis & HR, persistent understaffing and ongoing low wages of real property appraisers to give a few examples. These positions create accountability and results but if the heads don’t want accountability and results, then these position will remain in high turnover or be vacant.
*There are black market cannabis farmers working in the cannabis division. This is a joke.
Oh give it up NH!! I’m sure the County is glad you no longer work there!!!
Hippity Hop – Don’t worry your little self okay. Constrictive criticism is hard when you aren’t used to it.
*constructive 😛
Isn’t funny how Bowtie Ted tried to credit for getting good rating and now is looking for blame when the credit rating might be lost.
Maybe Bowtie when you combined the offices you overwhelmed Ms. Cubbison. But this is what you want. This gives you fuel to put the blame on her shoulders.
This boils down to Bowtie and three other idiots, two of them are running away, not doing their homework and making decisions without thought for the sole purpose of controlling the finances of the County. Take responsibility Bowtie, you can’t lie your way out of this!!!!!!!
Cubbison is a victim and/or overwhelmed? lol. She’s been promoted because no else with sense would take this job. This is another HR/ Cannabis director job where turnover and vacancy is going to be high.
Hmmn? Twitter is not a govt. agency . A County is not a Business– Public Finance 101. Local government finance is about the revenue and expenditure decisions of local governments. It covers the sources of revenue that are used by local governments such as taxes (e.g. property, income, sales), user fees, and intergovernmental transfers.
“In private finance ( a business) , the primary objective is to maximize wealth and profits for individuals and businesses.
In contrast, the primary objective of public finance is to promote the overall economic well-being of society and to provide for the public goods and services that the government is responsible for delivering.”
There is the difficulty of balancing local budget realities with decreased revenues, increased service demands and the costs of unfunded state and federal mandates and then the dramatic cost of infrastructure and associated costs.
given all the financial strife in spite of all of the veed $ collected from Sacramento like whores, $ which came from the swamp which were collected from???? wait for it the us taxpayer, you n me. how about let’s fall on the sword state wise and reorg under New CA.
https://www.newcaliforniastate.com/
sure this will bring out all the usual characters …whatever. you all can move to/back to the bay area and collect all ya free sheeeet, step on the needles, feces n free sheeeeet