Butts County officials were pleased to learn that they had scored a AA2 rating with Moody’s Investors Services, a New York City based bond credit rating business. The company ranks the creditworthiness of borrowers using a standardized ratings scale that evaluates potential investor loss in the event of default. In their ratings scale, borrowers are assigned 1 of 21 different ratings from Aaa to C, with Aaa being the highest quality and C the lowest quality. Only two ratings are higher than AA2, those being AA1 and AAA, or “Triple A”. Garnering a rating in any of the top four indicates the borrower is rated as “High quality and very low risk” with the “Best ability to pay back short-term debt”.
The bond rating is critical for local governments when used to issue General Obligation (GO) Bonds because the better the rating is, the less it costs to borrow money. In November, Butts County voters approved a continuation of the Special Purpose Local Option Sales Tax. The SPLOST committee that promoted the passage of “SPLOST VI” did so on the committment by the Board of Commissioners that a significant portion of the SPLOST would be used to pay off existing debt and allow SPLOST proceeds to pay back the bonds over time. This would effectively reduce over $1.5 million that has to be budgeted every year to service debt from the annual budget and allow the Commissioners to lower the millage rate down.
In a press release issued by Moody’s, they stated that Butts County’s AA2 rating “reflects the county’s ample reserves, low debt burden, and modest tax base anchored by significant institutional presence and slightly below average wealth levels”. Strengths included the County’s “Conservative financial management practices which have resulted in a history of ample reserve levels; average wealth levels and stable economy and a low debt burden”. The report also noted challenges the County may face, which include “Maintenance of financial flexibility while addressing rising expenditures” and the “Somewhat limited size of assessed valuation”. Overall, given the current recession, tighter restrictions on the credit market and associated regulations, the AA2 rating is still a significant achievement when compared the situation many other counties have found themselves in.
“I was very surprised to get the Moody’s rating back so quickly” said Interim County Administrator Michael Brewer. “I submitted the application to Moody’s on the 15th; they interviewed with Fran Womack. Rae Johnston and I for an hour on the 19th and the ratings committee awarded us the AA2 rating on Wednesday the 21st. I took that as a good sign for us that they were able to come back with a rating in such a short turnaround time. We are all extremely pleased with the rating which reaffirms that our Board’s policy of building and maintaining strong reserves has enabled Butts County to receive a very high bond rating from Moody’s. Given the current economy and the restrictive criteria in place today for creditworthiness, to secure a AA2 rating for a county of this size is an accomplishment and will help us to secure bonds at the best possible rates”.
Chairman Roger McDaniel noted that “This board has tried to be proactive in strengthening our overall balance sheet the past few years. While we’ve had to make some difficult choices, we have always tried to find a workable balance between offering efficient service while reducing costs. We’ve made some significant progress but we knew the best way to reduce the burden on our taxpayers would be to eliminate debt that had been on the County’s books for years” he added. “By removing the funds we have to budget each year for debt service from our general operating budget and consolidating old debt under SPLOST, we allow others who spend money within Butts County to help us retire this obligation. Some of this debt goes back many years and includes facilities such as the original jail, recreation buildings and offices that are now occupied by the Superior Court. Other debt includes part of our jail expansion and our obligation to the Development Authority land that the County backed almost ten years ago”
Officials from R.W. Baird and Company, who the Commission approved last year to underwrite the new bonds, plan to price the bonds next week. Following pricing, there will need to be a special called meeting of the Commission to adopt the Bond Resolution which will then allow the Commission to adopt the Bond Purchase Agreement.