As high as we can get
When the nation’s top two ratings agencies ranked Kent County’s credit position as among the best in the country for long-term and short-term debt a few weeks ago, both of the New York firms cited the county’s lengthy history of fiscal management as the key reason.
The county has held a gold standard for long-term debt since 1998, and was one of just 55 counties nationwide and one of only two in the state to hold a top rating from two ratings agencies this year.
The report issued by Standard & Poor’s said the county’s long-term Triple-A rating reflected what the agency saw as “maintenance of a very strong financial position, coupled with strong financial management practices, diversifying manufacturing-based economy with an expanded services industry, and moderate debt burden.”
Moody’s Investors Service reported that the county hasn’t wavered from its financial management position and “continues to maintain a variety of strong credit characteristics.”
The county held those ratings throughout the Great Recession, when the State Equalized Value of all real and personal property began falling in 2008 and the county’s taxable value started its decline two years later. The county’s consistently largest source of revenue comes from real property taxes, which accounts for 90 percent of that revenue.
When the county made its annual trip to New York last month to meet with the agencies, County Fiscal Services Director Stephen Duarte revealed to agency representatives that the SEV for real and personal property stood at $20.9 billion this year — roughly in the same spot as 2004, the first year the figure topped the $20 billion mark. Duarte said he expects the decline will bottom out in 2013 and start a slow rise the following year.
Duarte also noted that taxes collected as a percentage of taxes levied were at 92.7 percent on March 1, the date unpaid taxes become delinquent. The amount actually collected, though, usually rises within a few weeks after the forfeiture notices are mailed. It was at that same percentage on the same date from 2008-2010, and collections for those three years ended up topping 99 percent each year. “We’re consistent with that,” said Duarte.
The county’s tax revenue is expected to be $83.5 million in 2012, down from $84.8 million last year. Just under $10 million of that will come from personal property taxes, which Lansing could soon begin to phase out to a large degree.
State law requires the county to keep its debt limit at or below 10 percent of its $20.9 billion SEV, so Kent could legally carry a limit of almost $2.1 billion. But Duarte said the county’s direct debt load was $461.7 million at the end of March, representing 2.2 percent of its legal limit, a figure that was up from 1.9 percent a year ago.
The county’s net debt, however, was almost $166 million at the same point in time and was eight-tenths of one percent of its debt limit. The net debt on a per-capita basis was $275.46. Net debt is the debt the county pays directly, while the remaining securities are being paid for through user fees and by other revenue sources.
“The ratings agencies consider us to have moderate debt,” said Duarte. He added the county would pay off slightly more than half of its current debt load in 10 years: “This is just the county’s debt.” But Duarte also noted that for the first time in years, the county finds itself with an underfunded pension. He said the pension had a funding ratio of 97.2 percent and a liability of $17.3 million.
Duarte also said the agencies were impressed that the county hadn’t eliminated its capital improvement budget as other public units have.
“We are on the high side. We are at Triple-A with a stable outlook, and that’s as high as we can get,” said Duarte, adding that the county won’t be going on a spending spree over the next five years. “They gave us the ratings for both long-term and short-term.”
Joining Duarte on the trip were County Administrator and Controller Daryl Delabbio, County Treasurer Kenneth Parrish and County Commission Chairwoman Sandi Frost Parrish.
“We continue to position ourselves very well to make sure that we are fiscally responsible,” said Parrish, who added she was pleased by the ratings, but not surprised. “While we have had to make very difficult decisions, we believe those decisions have provided long-term benefits to the community.”