Reuters, September 18, 2015
Moody’s Investors Service cut the credit rating of Ferguson to “junk” status on Thursday, citing the city’s sharply deteriorating finances.
The rating agency said the seven-notch downgrade of Ferguson’s general obligation rating–to Ba1 from Aa3–was due to a “severe and rapid” financial deterioration that could lead to insolvency by the end of its fiscal 2017.
“Key drivers of this precipitous drop are declining key revenues, unbudgeted expenditures, and escalating expenses related to ongoing litigation and the Department of Justice consent decree currently under negotiation,” Moody’s said in a statement.
In a June 24 fiscal 2016 budget message, Ferguson’s Assistant City Manager Matthew Unrein said the city recognized it was in “perilous circumstances” and that continuation of the status quo would result in insolvency sometime in fiscal 2017.
Moody’s added Ferguson’s ratings could be withdrawn completely if the city continues to fail to provide requested information on cash-flow projections, legal costs and insurance coverage for legal settlements.