October 14, 2011
County’s AAA Bond Rating Reaffirmed
At the Board’s October 4 meeting, we briefly reported that the three rating agencies reaffirmed Mecklenburg County’s AAA bond rating. Since that time, we have received the rating agencies written reports and have posted these online at the County’s website.
During the last two years, Mecklenburg County has gone on a "debt diet" to moderate high debt levels that would threaten the County' stellar credit rating. This and other strategies have resulted in the stabilization and increasing of reserve levels, thereby improving the County’s debt profile. The County’s AAA rating is the highest rating possible and assures Mecklenburg County receives the most competitive rates on loan obligations.
In its report, Standard & Poor’s (S&P) said the stable outlook for Mecklenburg reflects the expectation that management will use its strong financial management procedures to adjust budgets as necessary to stay within its reserve policy levels. S&P also rated the County's financial policies and practices as "strong", indicating that these practices are well-embedded and likely sustainable. S&P does not expect the rating to change in the two-year parameter of the stable outlook.
Fitch’s ratings report cites proactive financial management and newly instituted debt affordability policy as drivers for the County’s continued AAA rating. This includes adhering to our general fund balance reserve policy despite drawdowns over the last two fiscal years for general operations mainly related to debt service expenditures. Estimated year-end 2011 results show an addition to fund balance and the FY2012 budget was balanced without the use of reserves. S&P also recognizes that, as part of the restructured capital planning process, we instituted more stringent debt affordability guidelines to restrict future capital projects to those that can be financed within the calculated debt capacity and available pay-as-you-go capital funds.
Moody’s report affirms the County's still-healthy financial position despite recent reserve reductions. The rating reflects effective financial management steps taken during economic downturns to stabilize and improve reserve levels and reduce the County's debt profile. While unemployment rates and the U.S. government credit profile could affect the County, Moody’s says the County’s healthy financial position is expected to persist given conservative management. Moody’s has retained the negative outlook on the County’s credit rating due to what it perceives as indirect linkages to the weakened credit profile of the U.S. government.
All three rating agencies noted the County’s efforts to reduce its exposure to variable rate debt. Since 2009 the County’s variable rate debt has gone from 45% of the total portfolio to 22%.
In addition to the issuance of general obligation bonds and the refunding of existing bonds, the County issued Special Obligation Bonds to finance solid waste related projects. These bonds were rated AA+ by S&P and Fitch and AA1 by Moody’s. These are extremely high ratings and reflect the strong revenue stream that supports these bonds. All of the bonds were priced on October 12 and 13. The average interest rates for the bonds are as follows:
- General Obligation Bonds – 1.5%
- Refunding Bonds – 2.9%
- Special Obligations Bonds – 3.4%
Overall, the rating agency reports were extremely positive and reflect the favorable steps the Board and management has taken to maintain and enhance a strong financial position.
Board members with questions should contact Finance Director Dena Diorio at 704-336-2228 or via email.
Vision 2020 Update
At its November 1 regular meeting, the Board will be asked to approve the Vision 2020 Community & Corporate Scorecard. Supporting documentation was emailed to the Board in advance of the October 11 public policy workshop that was later cancelled.
Associate General Manager Leslie Johnson will give a brief presentation at the November 1 meeting and is available to answer questions in the weeks preceding. The Board’s decision will provide staff direction on how to proceed with the planning for the 2012 Strategic Planning Conference.
The FY2011 budget adoption launched Mecklenburg County on a multi-year strategic path of redefining the County to include reassessing the 2015 Vision to determine if the goals are still relevant and/or realistic. Last year, staff gathered input from residents and employees on priorities for the community and organization. Seven themes emerged as Critical Success Factors for having the most impact in stimulating progress, sustaining renewal and ensuring the success of community and County:
- Jobs/Workforce & Economic Development
- High School Graduation & Literacy
- Service Investments & Delivery Model
- Fiscal Discipline
- Operational Excellence
The Board endorsed the Critical Success Factors at its Strategic Planning Conference in January 2011. The Vision 2020 Community & Corporate Scorecard incorporates these priorities as well as reflecting the unachieved goals on the current scorecard.
Board members with questions should contact Associate General Manager Leslie Johnson at 704-432-0090 or via email
-- Harry L. Jones, Sr., County Manager