(The Center Square) — The credit rating company S&P Global Ratings could lift New Orleans' credit watch if the Louisiana auditor's office approves the city's 2020 financial statement in the coming weeks, a move that will have significant impacts on its ability to borrow and fund projects.
A spokeswoman with the Louisiana auditor's office told The Wall Street Journal the city is awaiting final approval of its 2020 comprehensive annual financial report, which was reportedly made public late last month – a year and a half after the end of the fiscal year.
S&P Global Ratings placed New Orleans' A-plus long-term and underlying ratings on general obligation and limited property tax debt on credit watch in April, when the city became the largest to receive the sanction in more than a decade, according to the news site.
The move meant the city risked losing its A-plus rating, which would increase borrowing costs and drive up expenses for taxpayers.
"The CreditWatch action reflects that we will likely withdraw these ratings if we do not receive the city's fiscal 2020 audited financial statements within 30 days," S&P credit analyst Alex Louie told The Bond Buyer in April. "We consider this information necessary to maintain our ratings on these obligations."
New Orleans isn't alone. Last month the credit rating company withdrew ratings for 30 cities, counties and other municipalities over a failure to file 2020 financial statements.
A University of Illinois, Chicago study this summer found widespread and increasing reporting delays, with municipalities taking 10% longer to complete annual financial audits in 2020 than the year prior. The delayed disclosures raise concerns with municipal bond investors as inflation drives up costs for local government budgets loaded down with long-term retirement costs, the Journal reports.
Late reports hurt local governments and taxpayers by scaring away bond buyers, which can create higher interest costs.
The 30 municipal borrowers who had their ratings withdrawn by S&P Global Ratings included Louisiana school systems, according to the news site.
In New Orleans, officials blamed the delay on the pandemic and a 2019 cyber attack.
Under "The City's Debt Obligations" in the 2022 budget, New Orleans posted a disclaimer: "The following section describing the city's debt obligations is based on audited data from the city's 2019 Comprehensive Annual Financial Report. At the time of publication, circumstances beyond the city's control (i.e. COVID-19 and the recent cybersecurity attack) have not made it possible to include more recent audited debt information.
"Updated debt information will be contained within the city's 2020 Comprehensive Annual Financial Report," the statement read.
That report is not on the city website or listed with the Louisiana Legislative Auditor.
According to the most recent 2019 information, the city has $685 million in outstanding debt, with $69 million due in one year.
