05/05/10 — County bond rating goes up

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County bond rating goes up

By Steve Herring
Published in News on May 5, 2010 1:46 PM

Wayne County could realize millions of dollars in interest savings in coming years and find itself more attractive to economic development as the result of action by Standard and Poor's Rating Services.

County officials were notified late Friday that S&P has raised its long-term rating on the county's general obligation debt from "A+" to "AA-."

"It is hard for me to believe in the hard economic times we are going through that we have had a bond (rating) increase," county commission Chairman Jack Best said during the board's Tuesday session.

It is the first such increase in at least 25 to 30 years, County Manager Lee Smith said.

"It shows that the county, county management, county board and finance people have done a great job," said consultant Robert High, vice president of Davenport and Co. and past secretary of the N.C. Local Government Commission, during a telephone interview. "They have been fiscally responsible. They have maintained the financial health, in fact have improved the financial health of the county, which is all for the betterment of the residents of Wayne County.

"It's hard to put absolute terms on a bond upgrade. For one thing, it should be something that the folks of Wayne County should be proud of. I think it is very helpful to the businesses in the community. It gives them, and should give them, comfort that they are not going to be caught with any surprises from their government trying to dig out of a hole, so to speak. I think from a business standpoint a rating is also good for industrial recruitment for the same reason -- it shows stability and strength in the government."

The upgrades do not happen by chance, High said.

"Upgrades are not freely available, they are rare. I don't know that you ever anticipate an upgrade, especially in a down economy."

An upgrade also brings benefits, just like a higher credit score benefits the consumer, High added.

"From a credit standpoint, the better your credit rating, as with individuals, you should be able to borrow money at a lower cost and the availability of credit in a tight credit market is improved. The benefits are many. The benefit is more derived from the reasons that they got the upgrade -- the fact that the government is well managed and you don't have tax rates bouncing up and down. It is consistently managed. So they are able to step up and help in bad times."

Smith called the news, "a dream come true."

"We know we have capital programs in the future," he said. "This shows that we are stable. Companies that invest in areas look at things like this because they want to go to areas where you have secure services. Also, in future interest this saves us money. This will save us millions of dollars over the coming years."

Reading from the S&P report, Best said the rating reflected the county's:

* Continued growth and diversification of the local economy

* Strong financial management and growth in the level of the general fund balance reserves

* Low overall debt burden and rapid amortization of debt.

The report cited the county's consistent "sound financial operations which have contributed to consecutive operating surpluses since 2003." In particular it noted the 2007 unreserved fund balance of $22.9 million or 27.1 percent of expenditures. By 2209 the balance had grown to $26.5 million or 31.7 percent.

The growing fund balance has been a favorite target of critics of the board.

"In the past we have been criticized for the fund balance," Smith said. "What are people going to say if we grow fund balance? The story is we stuck to it because it is fact, you have got to have it to survive."

Smith said the county knows it will have future debt and is preparing for it, adding that rating agencies are looking at how that is being done.

"A lot of things, including the economy, are out of the county's control, but you can prepare for it," he said. "Commissioners have allowed us by hiring the right experts, putting the policies in place, putting reserves in place -- we were prepared for the downturn. We are weathering it, but we have a long way to go."

Smith also had high praise for Pam Holt, the county finance officer.

A number of other factors have played into the county's economic picture, Smith said.

"Our saving grace has been the state, by virtue of Cherry Hospital, the federal government with Seymour Johnson Air Force Base, and growing manufacturing in the area -- AT&T, AAR," Smith said. "I think that to me validates the investment we have made in economic development and the investment we made in things like WORK Keys because that has produced jobs, and if you have a good stable labor market the positions are going to come and they have started coming. I think those things have put us over the top."

Also of importance is the new U.S. 70 Bypass that is under construction that will connect to Interstate 795 that connects to Interstate 95.

"Business and industry coming to our community should say that this is a community that is stable and growing and that is reasonable in what they charge and how they do business," he said. "This is positive all the way around."

The county has been able to diversify and the goal is to be even more diversified, he said.

"That is what the Wayne County Development Alliance is working on, the chamber," Smith said. "So you don't worry about one single industry that closes their doors tomorrow that would shut you down. We have been able to suffer through economic hits and loss of jobs."

The local economy has been bolstered by Progress Energy's $900 million planned new natural gas-fired turbines at its Lee plant on the Neuse River. Another $15 million in transmission lines are to be added within next two years.

Home prices have stabilized even though some people did suffer losses, Smith said.

Wayne County was not on the housing bubble, and Smith attributes that to Seymour Johnson and the ebb and flow of military personnel into the county.

"We suffered, but we did not suffer like a lot of other communities," he said.

Commissioner Andy Anderson said he has seen a lot of things happen that contributed to the new rating such as AAR, Spirit Aero Systems in Kinston and now the proposed Sanderson Farms plant.

However, having the better rating does not mean the county can relax its efforts, Smith said.

"When you get to a certain level you have to fight to stay there," he said. "It doesn't mean that you can relax now, you work harder."

"Managing county government is big business, it is a complex business and you do have to stay ahead of the game," High said. "It is a constant challenge to keep things moving forward."