County's credit rating improvesTop agencies reclassify Baldwin in time for $24.6 million bond issue Sunday, April 27, 2008 By RYAN DEZEMBERStaff Reporter
Baldwin County's credit rating, which dictates how much taxpayers shell out to borrow money for large projects, was boosted this month by the nation's top two ratings firms.
Moody's and Standard & Poor's both announced that they had increased the county's creditworthiness to levels that few governments in Alabama can match.
On the Moody's system the county went from Aa3 to Aa2, while on the Standard & Poor's scale the county jumped from AA to AA+. Those ratings are just below the highest possible score on both scales.
The reclassifications come after a group of county officials traveled to New York to lobby for the change and just prior to the anticipated sale of $24.6 million in bonds that will be used to fund a slew of road and construction projects.
The county's clerk-treasurer, Kyle Baggett, said that if the ratings increase knocks only one-sixteenth of a percent from the interest rate of the pending issue, the county would save somewhere between $100,000 and $150,000 over the life of the 20-year bonds.
The new ratings have also been applied retroactively to more than $107 million of the county's past bonds, opening up the possibility of more savings should county officials decide to refinance any of that debt, Baggett said.
"Being given these upgrades in ratings at this time of national and state financial and economic turbulence sets Baldwin County apart from the other counties in the state," County Administrator Michael Thompson said in a news release. "It recognizes that the finances of the county are being managed and maintained in a fiscally sound way."
Just as individuals are likely to get a better interest rate on a credit card or car loan if they have a history of managing their money well and paying bills on time, county officials expect the interest rate they'll pay to the investors who buy the bonds will be lower with the new rating.
Baggett and Thompson also said that the increased rating will probably also make it cheaper to insure the bonds should they deem that necessary.
Baggett said that when he started working for the county in the mid-1990s, Baldwin's rating was equivalent to that of speculative high-risk investments, often called "junk bonds," and therefore whenever the county sold bonds to raise money for road work or public buildings, it had to pay upward of 2 percent of the entire bond issue in insurance to pacify investors.
One percent of the pending issue is $246,000, but with such a high rating the county may not have to buy any insurance at all, Baggett said.
"Even if we buy the insurance it will be relatively cheap," Baggett said. "One percent would be a huge cost if we had the same rate."
That means that the end cost of the projects funded by the $24.6 million will be cheaper for taxpayers than they would have been 10 years ago.
Both Baggett and Thompson said the new rating is a product of about a decade of work, from rethinking how the county budgets its money to how it spends it, what accounting procedures it follows and how much cash it saves.
In a bulletin published earlier this month announc ing the rating increase, Moody's analysts noted the county's general fund reserves of $18.21 million which represents about 35 percent of the county's annual revenues at the end of fiscal year 2006 and projections of a 2007 budget surplus of more than $7 million will be added to that total.
"Moody's believes the county's financial position will remain solid, given a history of conservative budgeting and strong fiscal policies which have allowed for ongoing increases in reserves and improved cash levels," analysts wrote.
The ratings company also cited the county's steady growth in sales tax revenue over the past five years, averaged at 9.8 percent annually, and the potential for major growth in the northern part of the county to coincide with the opening of ThyssenKrupp's steel plant in north Mobile County.
Moody's also said that if the county's proposed "Pay-As-You-Go" program to fund road, bridge and drainage work is approved by voters in a special election June 3, "it will provide the county with even greater financial flexibility and debt-paying ability."