City refutes claim in Wall Street Journal that Charleston is broke

CHARLESTON, S.C. (WCIV) -- The Wall Street Journal's report that Charleston has absolutely no money on hand is unfounded, according to the City of Charleston.

City officials said in a statement Tuesday night that the Wall Street Journal's findings were out of context with the way the city operates. City officials said the financial report cited in the Journal is correct in that it shows a cash balance of zero on Dec. 31, 2012, but does not take into account that the city's fiscal year matches the calendar year.

"However, this does not reflect the $43.5 million of consolidated cash on hand on December 31, 2012 that was available to pay operating expenses during the interim and that the majority of various tax revenues (roughly $63 million) occur in January and early February.{} 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," the statement reads.

City officials said the Journal missed Charleston's unique calendar year, which led to it misinterpreting the data and reporting a weak fiscal climate when the city is actually strong.

Officials point to Charleston's AAA rating by Standard & Poor's and AA1 by Moody's as evidence the Journal misinterpreted the city's financial records.

"In March 2011, in confirming its original AAA rating in 2009 - an upgrade given in the midst of the great recession, S&P noted the City's 'exceptional and consistent financial performance, supported by good embedded financial management policies and procedures, and strong historical fund balance levels,'" the statement from the city reads.

The city's response goes on:

"Fund balance levels have continued to improve since S&P's 2011 report.{} As of the City's latest financial report dated Dec. 31, 2012, its unrestricted fund balance level grew to $29.7 million or 23.2 percent of general fund expenditures and its unassigned fund balance level grew to 21.3 million or 16.7 percent of general fund expenditures.{} Fund balance is the primary liquidity ratio that is measured by the rating agencies.

"Thus, due to the timing of the City's financial close-out report (December 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. The City is under absolutely no financial stress to meet all of its financial obligations. 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 Wall Street Journal in recent days has published a multi-part series on the financial health of American cities with corresponding charts. The paper's research shows that the largest 250 cities in the country have an average of 81 days of cash on hand to operate.

Charleston and Pomona, Calif., topped the list with no cash on hand, according to the paper.