Rating Action: Moody’s confirms Ba2 on Jackson (City of) MS, Water and Sewer Revenue Bonds; outlook is stableGlobal Credit Research – 22 Dec 2021New York, December 22, 2021 — Moody’s Investors Service has confirmed the Ba2 rating of the City of Jackson, Mississippi Water & Sewer Enterprise’s Water and Sewer System Revenue bonds. The outlook has been revised to stable from ratings under review. The bonds are outstanding in the amount of $191 million.RATINGS RATIONALEThe confirmation of the Ba2 rating and assignment of the stable outlook reflects our review of the unaudited financial results for fiscal 2020, which includes the benefit of the receipt of approximately $60 million in settlement monies that have allowed the water and sewer system to repay the city general fund, restore its contingency fund, and boost days cash and debt service coverage to 192 and 2 times respectively. The confirmation also incorporates the system’s ongoing challenges, which include implementation of an effective billing and collection system, management of a very large consent decree, and substantial capital needs that will continue to create narrow operating margins. Very early indications for fiscal 2021 suggest that these obligations have reduced cash to approximately 99 days and sum sufficient coverage. However, these figures are very preliminary and subject to additional refinement as the city closes the fiscal year. Operating revenues will be boosted by an approved 20% rate increase anticipated to take effect in March 2022 and are not factored into the otherwise balanced budget.This confirmation resolves our review of the water and sewer system rating, which was placed under review for possible withdrawal for lack of sufficient information on October 31, 2021.RATING OUTLOOKThe stable outlook reflects our expectation that rate increases will enable it to improve debt service coverage and cash and combine with state or federal support to help address long-term capital needs.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Effective implementation of billing and collection system that efficiently captures revenues- Finalization and material reduction of the consent decree- Improved financial operations resulting in substantively strengthened debt service coverage by current net revenuesFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Downgrade of the city’s GO rating as a result of material weakness of liquidity or reserves- Loss major customers without offsetting reduction of costs- Inability to generate current net revenues sufficient to pay debt serviceLEGAL SECURITYThe revenue bonds are secured by the net revenues of the Jackson Water and Sewer system.PROFILEJackson is the state capital of the State of Mississippi (Aa2 stable). The water and sewer system serves an area of approximately 150 square miles, including the City of Jackson (Baa3 stable) and portions of Hinds, Rankin, and Madison counties.METHODOLOGYThe principal methodology used in these ratings was US Municipal Utility Revenue Debt published in October 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1095545. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. 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