Charleston denies financial stress, says Wall Street Journal reporter confused

Staff Report
Published Oct. 30, 2013

Charleston recently received a new ranking — No. 1 on The Wall Street Journal’s list of cities with the least cash on hand to pay their bills, giving the city the worst ranking of 250 cities nationwide.

The city’s CFO said the reporter misunderstood that the city’s fiscal year is the same as its calendar year, which led to what it called an erroneous ranking.

“The city is under absolutely no financial stress to meet all of its financial obligations,” CFO Stephen Bedard said in a statement. “If the city were in the level of distress implied, it certainly would not have the highest credit ratings of any cities in South Carolina as given by both S&P and Moody’s.”

The Journal published a graphic on Monday titled Cities Under Strain, which accompanies a story titled U.S. Cities Grapple with Finances, ranking cities for issues with cash reserves, state aid, population or taxable real estate per capita, to name a few categories.

The city said the reporter came to the conclusion from one line item in the city’s 2012 Consolidated Financial Report from Dec. 31, 2012.

The line item does report a cash balance of zero, but Bedard said it does not reflect the $43.5 million of consolidated cash on hand on Dec. 31, 2012, which was available to pay operating expenses during the interim.

It also did not note that the majority of the city’s various tax revenues, equaling roughly $63 million, occur in January and early February, Bedard said.

“The fact that these funds are paid in 2013 but go back to 2012 are the result of the city’s fiscal year being the same as the calendar year, something that has been in place as far back as records are available but is extremely unusual for municipal governments,” he said.

“The fact that the city has this unique fiscal year was most likely missed by the author of the table and helped lead to the lack of understanding of the strong financial health as shown in the city’s financial report.”

A city news release sent today in response to the WSJ story also noted that the city has received AAA ratings from Standard & Poor’s and Aa1 by Moody’s.

As of the city’s latest financial report from Dec. 31, 2012, its unrestricted fund balance level grew to $29.7 million, or 23.2% of general fund expenditures, and its unassigned fund balance grew to $21.3 million, or 16.7% of general fund expenditures, according to the city.

“Thus, due to the timing of the city’s financial closeout report (Dec. 31) and the way cash levels are reported in one line item in that report, the city was inappropriately identified as having low cash levels to meet expenses,” Bedard wrote.

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