County Gets Highest Grade, Again
GRAND RAPIDS — One reason two of the nation’s leading bond-rating agencies renewed Kent County with their top rating was because of the financial turnaround the county had with last year’s general fund.
The general fund, which pays for most of the services the county offers, was projected to end the year with a $3.1 million deficit in 2007. Instead, it closed with a surplus of $920,000 and completed an unexpected $4 million swing.
Kent County Fiscal Services Director Robert White told commissioners last week that the turnaround largely came about because the property-tax receipts the county received last year exceeded the previous year’s take — by a lot.
In 2006, the county took in $80.2 million in tax revenue for the general fund. Last year, that total jumped to $89.7 million.
“In terms of revenue, that grew by almost 12 percent,” said White. “This was not from a tax increase.”
White explained that 2007 happened to be the final collection year for the property tax billing date change the state instituted years ago, which moved billings from December and July to July only. That switch let the county to collect 15 months worth of property-tax revenue in a 12-month period.
But White said the county isn’t likely to get a repeat performance this year, as tax revenue will revert back to the $87 million-total that was expected last year. Still, the 2008 general fund is looking at a surplus this year.
“We’re now forecasting an excess of over $500,000,” he said.
The news that Moody’s Investment Services and Standard and Poor’s reissued a Triple A rating for county securities couldn’t have come at a better time. The county will put about $22 million worth of bonds on sale Thursday. The top rating means Kent will pay a lower interest rate on the 20-year bonds, and without using a bond insurer.
“It will be a competitive sale. Your advantage has been you haven’t had to purchase bond insurance,” White said to commissioners.
The sale is expected to close by May 15 and White said the county is looking at paying buyers an interest rate somewhere around 4.3 percent. White said the Triple A rating means the county’s interest rate will be a quarter-point less than if Kent was rated at Double A. The county will save more money by not having to pay an insurer the up-front cash they require.
Kent will use the revenue from the bond sale to make improvements to its Fuller Avenue Campus and to build a new 63rd District Courthouse on property it is buying from Grand Rapids Township.
Only 48 of the roughly 6,000 counties in the nation have a Triple A bond rating. Kent is one of only three Michigan counties that carry the top rating; Macomb and Oakland are the others.
“We should not consider this lightly. I think this is something we should be proud of,” said Commissioner and past Commission Chairman David Morren.
Two other reasons Moody’s and Standard and Poor’s gave Kent its highest marks were because the general fund has a strong reserve that tops $73 million and the debt load is only 2.1 percent of the State Equalized Value of real and personal property in the county. If only the county’s net direct debt is considered, the load level drops to 0.8 percent of the SEV. The state’s legal debt load limit for counties is 10 percent of the SEV.
Moody’s has given the county its highest rating since 1998, while Standard and Poor’s has done the same since 1999.
“We were successful in defending our Triple A bond rating in New York last week,” said Roger Morgan, commission chairman.