County and state survive ratings downgrade
The one-notch downgrading of the nation’s bond rating by Standard and Poor’s apparently won’t do any fiscal harm to the credit ratings of Kent County and the state of Michigan.
Kent County Administrator and Controller Daryl Delabbio said last week that both S&P and Moody’s Investors Service reported the county’s triple-A bond rating will remain intact.
“Moody’s was taking a close look at a number of communities that hold the triple-A rating. Of specific concern to the ratings agency were ‘vulnerable localities’ that have lower fund balances, weaker financial governance and management, and, from its perspective, no room to raise property taxes,” he said.
Although the county doesn’t intend to raise its millage rate, state law would allow the rate to go up from the current 4.28 mills to 4.32 mills, which would raise more revenue for the county from property-tax collections. That revenue is forecast at $84.6 million for 2012, down by about $400,000 from this year’s projection.
“We’re not changing our full millage,” said Delabbio.
“While we felt confident that our fund balance and our history of solid financial policies and management were strong enough to withstand any reevaluation, it is not something we take for granted,” he added of the county’s credit rating.
The county’s general operating fund balance this year is $68.6 million, and the county’s cash reserves are $32.9 million, enough for 53 days of operations. The county’s total debt service this year is $69.9 million, well below its legal debt limit.
The county has held its long-term triple-A rating for 13 consecutive years. County officials said Kent saves about $800,000 more per year on interest payments for its currently bonded projects than if it had a double-A rating.
“It is important for us to maintain our excellent rating in order to save on interest rates, thereby reducing costs for all of Kent County,” said Delabbio.
Moody’s reportedly reviewed the credit ratings of 162 communities nationwide.
The Michigan Economic Development Corp. reported the state’s general-obligations bond rating rose from “stable” to “positive.” Fitch Ratings said the positive outlook reflected “prudent budgeting and efforts to grow reserve levels in the context of an economy beginning to slowly rebound.” The state Treasury Department said Michigan has roughly $1.5 billion of general-obligation debt on its books.
The state lost its triple-A credit rating in 2003. Moody’s has rated the state at Aa2, which is two notches down from the top mark. S&P and Fitch have the state’s creditworthiness rated a full notch below the Moody’s rating.
The MEDC also reported last week that the U.S. Small Business Administration has loaned more money this year to Michigan’s small businesses than to any other district in the nation. Compared to last year, the SBA has increased its number of loans in the state by 42 percent this year, and the 2011 total loan volume is up by 60 percent from 2010. Through July, the MEDC said SBA loans have totaled $635.2 million, and the federal agency is on track to make $1 billion in loans to the state’s small businesses.