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County receives a ‘no’ on credit rating upgrade

While Moody’s Investors Service did not raise Washington County’s credit rating during a recent review, Mayor Dan Eldridge said feedback from the analysts was positive.
Eldridge, Commissioner Mitch Meredith and financial advisor Rick Dulaney, of Raymond James & Associates Inc., traveled to New York at the first of the month to request an upgrade from an Aa2 to an Aa1 credit rating.
“There’s no question we meet the financial metrics for Aa1, and we had hoped Moody’s would agree,” Eldridge said.
The county contingent met with a pair of analysts for two hours to provide current numbers from the 2013 audit, and an economic update on population growth, residential and commercial development, employment, per capita income, and historical collections of property tax and local options sales tax.
The decision from the Ratings Review Committee was received Dec. 11.
“We’re disappointed, but Moody’s confirmed the direction Washington County is taking and responded favorably to the policies we’ve adopted,” Eldridge said. “They said they would review us again in a year.”
Newly-implemented fiscal policies, which include implementation of formal fund balance policies for the General Fund and Debt Service Fund, were listed as strengths in the published report. Increases in reserves during fiscal 2013 also point to a strong financial position.
According to the opinion, Moody’s believes the county’s overall financial position will continue to remain strong due to a structurally balanced budget, healthy levels of liquidity and reserves, and prudent financial management.
Despite a $145,000 operating deficit in fiscal 2009, the county generated consecutive operating surpluses during the following four fiscal years, increasing the total General Fund balance to a high of $18.6 million in fiscal 2013 from $13.2 million in fiscal 2009.
The failure to achieve an upgrade, in Eldridge’s opinion, reflects Moody’s concern about future debt levels.
The two items listed under the challenges section of the report are potential increase in debt service costs due to capital needs; and a comparatively weak amortization of principal.
“They felt the school board’s adoption of a long-range facilities plan was a concern from the perspective that if we were to follow through, it would be committing the county to more than $200 million in debt,” he said.
Eldridge said the county team shared the collaborative discussions that have been held with the City of Johnson City on ways to provide solutions without incurring an unmanageable debt burden.
“(Moody’s) understands that, but they don’t look at the best-case scenario,” he said.
Despite not receiving an upgrade, Eldridge thinks the visit to Moody’s was worthwhile. “From their perspective, I think they appreciated the time we took to meet face to face,” he said.
“We were able to demonstrate Washington County is well-run, and the place we are in today is the result of a history of good, conservative fiscal management.”