City of Odessa officials Monday announced Fitch Ratings recently affirmed Odessa’s GO Bonds at ‘AA’; Outlook Stable.
A news release detailed Fitch Ratings is a credit rating agency and one of the “Big Three credit rating agencies.”
The other two of the big three are Moody’s and Standard & Poor’s, which both withdrew the City of Odessa’s bond ratings last month, which could lead to the city having a much harder time obtaining financing for any future capital improvement projects.
An email to Odessa’s spokeswoman, Monica McDaniel, asking if there was an update to the loss of the other two ratings had a response of “no.”
S&P and Moody’s rate municipalities and other entities based on objective and independent analytical information and share that information with the marketplace.
In this instance, both companies announced they withdrew the city’s A+ rating because they had “insufficient or otherwise inadequate information” to support that rating. That was due to the City not having completed the 2022 or 2023 audit paperwork.
At that time, Odessa City Manager John Beckmeyer said steps had been taken to get the ratings back and to ensure they’re not withdrawn in the future.
Economist Ray Perryman of The Perryman Group on Monday said financial markets rely on all of those big three and expect there to be general consistency. “They are all similar. Most investors look at all of them,” he said via email.
Asked if it remains important for the City to restore the other ratings, Perryman said it is. “Absolutely. Financial markets rely on all of them,” he said. “Once they are restored, there will be an indication in the records that they were removed at one point.”
In other words, the City will still have a “ding” on its record.
Craig Stoker, who is seeking the City’s At Large council slot against incumbent Denise Swanner, said the news about the Fitch rating was no great surprise but bemoaned the blemish on Odessa’s record.
“This probably could have all been avoided by not letting the new majority on council run off the city’s top management and then replace them with folks who had no experience in municipal government. The city’s new finance director has certainly faced a steep learning curve since she started, and has risen to the occasion, seeing as neither she, nor anyone on her team, had municipal accounting experience. I am glad most everyone can see that the problem lies above them at the feet of the council.”
Stoker said he looks forward to Odessa having its full credit worthiness restored and to having both the 2022 and 2023 audits available on the City’s website. “People are ready for a change, and I look forward to earning everyone’s vote on November 5th.”
Mayoral candidate Cal Hendrick said the news Finch affirmed Odessa’s IDR and GO Bonds at AA, made him happy but warned the news is not all good.
“Sophisticated investors look at all 3 credit rating agencies to judge the financial viability of a governmental entity. It is critically important that the City of Odessa complete its audit for 2022 and 2023 to enable the City to recover its lost bond ratings.”
Hendrick is challenging Mayor Javier Joven for the seat in November’s election. Joven is in his first term as mayor.
“I am not a financial expert, but obviously financial markets rely on multiple data points, and certainly all 3 credit rating agencies to judge the financial well-being of governmental entities like the City of Odessa. It is very important. Investors expect consistency. A lack of consistencies in bond ratings will downgrade the value of the bond. Thus, the City of Odessa’s bond ratings are negatively affected by the Standard and Poor’s and Moody rating removal.”
Hendrick said Odessa must have credit rankings from all three agencies. “I am very concerned that most investors will not be willing to buy Odessa securities due to our loss of credit ratings with Standard and Poor’s and Moody.”
Hendrick said if elected, he will strive to get the past-due audits filed, as well as ensure all future audits are completed in a timely manner. “But, the citizens of Odessa must realize that even if Standard and Poor’s and Moody restore Odessa’s credit rating, there will be an indication in the financial records that Odessa’s credit ratings were removed. In other words, the City will have a permanent stain on its credit rating, and its financial reputation. The loss of the City’s credit rating is inexcusable.”
Some have tied the loss of ratings to the loss of staff at the City during the last four years.
The Odessa City Council voted on Dec. 13, 2022, to terminate City Manager Michael Marrero and City Attorney Natasha Brooks and one week later finance director Cindy Muncy retired.
Zackary Beseril, the city’s budget manager, submitted his resignation letter April 3, 2023, and Director of Finance Larry Fry retired effective May 31, 2023.
Interim Director of Finance Seth Boles resigned Sept. 29, 2023, shortly after finishing up the FY23-24 budget for the city.
Beckmeyer previously said that when he replaced Interim City Manager Agapito Bernal in August 2023, the first order of business was to prepare that budget.
Boles told him they were running a “little bit late on the audit” but it was 80% complete, Beckmeyer said. After Boles quit, he learned the audit wasn’t that complete from the city’s outside auditing firm, Weaver.
Two months later, the city hired a new finance director, Kaylie Banda, and an internal auditor, Kala Hardy and they began to work on the audit, he said.
“There was no paper trail so we had to build it from the ground up basically and that’s what’s taking so much time,” Beckmeyer previously told the OA.
Perryman previously said the loss of the ratings was not unprecedented but it only happens a few times a year.
“It’s viewed as a substantial problem in the investment community. One consequence of this failure is that it will compromise the ability to raise capital for infrastructure and other public needs in the future,” he said in July.
