Hospital financial mess damages Jackson County's credit

JACKSON COUNTY -- Singing River Health System's financial mismanagement has officially hurt Jackson County's credit.

The county's bond rating, something it has been proud of for years, has been downgraded by three notches. It is still in the A range, but where it used to be three steps from the top rating, it is now six.

What that means is when the county borrows money, which it does by selling bonds, it won't get as good an interest rate. The poorer bond rating is expected to cost the county an additional $7,000 in interest over a 10-year period for every $1 million it borrows.

Moody's Investor Service rates the county, and the verdict came after Thanksgiving.

The county-owned hospital system is roughly $100 million in debt and Jackson County is on the hook for that if the hospital fails to make payments. There is the extra liability of a failing pension plan.

SRHS announced early in 2014, when it switched CEOs, it had been for years stringing along $88 million in bad debt and calling it revenue. Since that announcement, there have been changes. The system tried to divest itself of the longtime, expensive employee-pension plan, but the hospital's current chief financial officer has described what the hospital went through as a financial Katrina.

Before the 2014 announcement, it appeared to Moody's and others the hospital was self-supporting. Now it appears the county will be brought in to fix part of the problems with either the hospital or the failed pension plan. And Moody's clearly took that into account when making its decision Nov. 30.

Steve Edds, the county's bond attorney, said he believes as soon as the SRHS issues are cleared up, the county's bond rating will improve.

Moody's job is to assess risk, one county official said, and the downgrade reflects higher risk.

The hospital is entangled in lawsuits over the financial failures, there's a settlement with retirees looming and the county is financially involved.

Without the hospital, the county looks pretty good, Moody's indicated in its report, which noted a "stable tax base, low debt burden, and strong financial position."

But it has placed the county under review for a further possible downgrading. Besides the hospital situation, it also attributed the recent downgrade to "the county's weak financial disclosure practices." It plans to look at other entities the county is responsible for -- the library system, fire districts, the emergency communications district and the Port of Pascagoula -- to see if there are any financial risks there.

It also warned the county relies heavily on a few industries for its tax base and is not diversified. It said the top 10 taxpayers account for more than 50 percent of the property value.

Moody's says what could make the rating go up:

n A reduction in SRHS debt or a material improvement in SRHS operations

n A reduction in (industrial) taxpayer concentration

n An additional growth in reserve funds

What could make it go down:

n For the county to draw on its reserves to support SRHS' debt, pension or other expenses

n A significant reduction in the reserves for any reason

n More county exposure to other component units, which are entities such as the hospital, library system or port

n The loss of a critical (industrial) taxpayer

This story was originally published December 11, 2015 at 7:43 PM with the headline "Hospital financial mess damages Jackson County's credit ."