Santa Fe could lose its bond rating if city officials don’t cough up financial statements from 2021 next month, S&P Global Ratings warned this week.
The city’s audit is more than a year overdue and still several months from completion. Officials say they expect to finish it by the end of June. That may not be soon enough for S&P, which rates the creditworthiness of local governments around the country. The company listed Santa Fe as “CreditWatch negative” on Monday, signaling the city’s AA bond rating could be adversely impacted in the future.
The rating is more than just a couple of letters on paper. It can mean real money. Cities with lower bond ratings risk having to pay more to borrow cash for projects such as building roads and parks.
State Auditor Joseph Maestas, a former city councilor and mayoral candidate who took the reins of the state office in January, raised concerns about the possible hit to Santa Fe’s bond rating and other ramifications of the late audit in a letter to city officials on Thursday.
Maestas said the state is currently withholding $10 million in capital funding from the city and another $13 million is “likely to be withheld after the completion of this legislative session due to late audit reports.” The city has sought funding this session for improvements to the Midtown campus and SWAN Park, among other things.
State regulations require the city to submit quarterly updates on the status of late audits. In its March 15 update, city officials said the city’s auditor aims to submit the 2021 audit by June 30 “provided no significant challenges are encountered during the course of audit testing.”
But Maestas noted that is well after S&P’s deadline.
City Clerk Kristine Bustos-Mihelcic, a spokeswoman for the city government, told SFR that city staff are communicating with S&P about additional options and steps moving forward.
Santa Fe isn’t alone in falling behind on producing financial statements during the COVID-19 pandemic. S&P Global Ratings placed several other cities, towns and counties on CreditWatch Negative this year due to a lack of timely financial information. The company says many governments are grappling with staffing shortages at auditing firms and staff turnover in accounting departments.
Last summer, the city’s finance director left the job a few days after news broke that a firm the city had hired for the audit had withdrawn and the state auditor’s office would intervene. The current late audit marks Santa Fe’s fourth consecutive late annual audit.