July 24, 2009
Rating Agency Visit
On July 9-10 County Finance staff, the Board Chairman and I traveled to New York to meet with the three major bond rating agencies: Moody’s, Standard & Poor’s and Fitch. We presented information regarding our current financial position and reviewed the four bond transactions currently underway in Mecklenburg County that include:
- the refunding of variable rate bonds to the windows variable rate structure
- the refunding of variable rate general obligation bonds to fixed rate bond
- the refunding of variable rate Certificates of Participation (COPs) to fixed rate Limited Obligation Bonds (LOBs)
- the issuance of $100 million in new general obligation bonds.
All three rating agencies affirmed the County’s long-term AAA bond rating and assigned the highest short-term rating to the windows variable rate bonds. Overall, all three rating agencies remain positive about the County’s financial position; particularly as it relates to the maintenance of a healthy fund balance, an increased commitment to pay-as-you-go capital financing and a significant reduction in variable rate debt exposure. Both Moody’s and Fitch indicate that maintaining above average reserves is an important rating factor given the County’s above average debt levels and weakening economy.
While maintaining optimism about the County’s financial management, the rating agencies continue to express concern about above average debt levels that are inconsistent with the rating category and indicate that compliance with our revised debt policy will be key factors in future credit analyses. They also note that the unemployment rate in Mecklenburg County, which now exceeds that of the United States, could be a negative factor in future credit analyses as it could be an indication of whether the County can quickly recover from the recession. Moody’s specifically cited that unemployment at current levels for a sustained period could impact the County’s credit profile. Copies of all three reports will be sent to the Board under separate cover.
On July 21, the County priced its windows variable rate bond transaction with great success. Mecklenburg County was the first local government in the Country to issue this type of bond, which eliminates the need for bank liquidity and provides a seven-month window to refund the bonds in the event of a failed remarketing. The $120 million included in this transaction was divided equally amongst four mutual fund companies, including Federated, Charles Schwab, Blackrock and J.P. Morgan/Chase. The spread to the short-term index was set at 10 basis points.
For more information, Board members may contact Finance Director, Dena Diorio by email
Qualified School Construction Bonds (QSCB’s)
As part of the American Recovery and Reinvestment Act of 2009, Charlotte-Mecklenburg was allocated $26 million in Qualified School Construction Bonds in 2009 and 2010. The bonds are tax credit bonds, that is, the purchaser receives a tax credit in lieu of interest. Therefore, the bonds are interest free for the County. The North Carolina Department of Public Instruction (DPI) has been designated to manage the program.
DPI recently sent out guidelines for the program which in part requires counties to “claim” their 2009 allocations by having the local education agencies pass a resolution of support by July 31. Failure to claim our allocation puts us at risk of losing the funds to other counties. At the County’s request, Superintendent Gorman has placed this item on the Board of Education’s agenda for its meeting scheduled for July 28. County staff will be in attendance to respond to questions about the program. The Board of County Commissioners will receive a full briefing on the program at the August 4 meeting.
Stimulus Funds Awarded for Stream Restoration
Mecklenburg County continues to successfully leverage local money to obtain state and federal grants for Storm Water Services projects. The latest award of $2.576 million in federal stimulus money, along with $600,000 in County Storm Water revenue, will be used to restore Torrence Creek in Huntersville.
The restoration of this section of Torrence Creek is the highest priority project identified in the McDowell Creek Watershed Management Plan. The badly-eroded creek is part of the McDowell Watershed, which drains to Mountain Island Lake just upstream of the main source of Charlotte-Mecklenburg’s drinking water. The project had been designed and permitted using Storm Water revenue and was “shovel ready,” which greatly improved the project’s standing in the competitive selection process. In March, Storm Water Services applied for funding under the American Recovery and Reinvestment Act (ARRA).
Governor Beverly Purdue recently announced that the Torrence Creek project is on a list of 40 “drinking water, wastewater and storm water projects” approved this month to receive a total of $45 million in stimulus support. Under terms of the ARRA, the $2.576 million dollar award for the Torrence Creek restoration project is considered a loan. Half of the total amount is automatically forgiven. The remaining 50%, or $1.288 million for the Torrence Creek project, is loaned to the County at no interest.
The Board of County Commissioners will be asked to formally accept the award in a local Resolution in the coming weeks. Construction is anticipated to begin in late 2009.
Tuesday, August 4
- 12 noon Human Services Strategic Planning Meeting- Rm 267, CMGC
- 2pm, Economic Development Committee Meeting- RM 278
- 3pm, Criminal Justice Committee Meeting - 11th Floor Large Conference Room, CMGC
- 3pm, Natural Resources Committee Meeting - Rm 280, CMGC
- 5pm, Dinner Meeting- CH14
- 6pm, Regular Meeting - Chamber
- Harry L. Jones, Sr., County Manager