Two of the happiest people in Ellis County on Thursday were County Judge Chad Adams and County Auditor Mike Navarro.
The reason? A rare coup for a governmental body - an upgrade in its bond rating that translates to savings with the upcoming sale of $53.9 million in general obligation bonds to fund county facilities.
Moody’s Investors Service has upgraded Ellis County from an A1 to an Aa3 and Fitch Ratings increased its rating to that of AA-. Both ratings are considered “high quality” ratings and Adams said he hasn’t been able to find any another county in the North Texas area with as good of a rating. Available information indicates the county also has a better rating than any of the governmental entities within its borders.
In his fifth year as county judge, Adams compared his excitement about the upgrades to that of being re-elected.
“It’s as if these companies told us, ‘You’re doing a great job. We’re going to upgrade you,’ ” he said, with Navarro, a 14-year veteran with the county, adding, “It certainly validates all of the hard work and several years of team work.”
“Moody’s believes the county’s financial position is strong given its available and liquid reserve levels,” reads a press release from the company. “Moody’s also believes the county’s historically prudent fiscal management practices will result in the maintenance of this healthy financial position consistent with the Aa3 rating level.”
Fitch also praised the county, noting in its release, “The AA- rating reflects the county’s strong financial position with substantial reserves aided by conservative, proactive management, steady tax base growth and a low direct debt burden,” and adding, “The county’s recent financial performance and good management team suggest the county will be able to maintain its favorable financial profile going forward.”
Navarro said the rating companies noted several accomplishments on the county’s part, including increasing a 22-day financial reserve five years ago to a current 88-day reserve of funding as well as putting together another reserve of about $11 million in proceeds from the sale of the Superconducting Super Collider and the justice center settlement.
“At the end of the day, the county is run very well,” Navarro said. “Reviewers were impressed with our record of innovation rather than taxation.”
Adams said he and Navarro interviewed with both Moody’s and Fitch, answering an extensive list of questions from each.
Among the key topics for the two companies were financial practices, current and planned infrastructure, current debt and financial reserves. They also asked about the county’s public-private partnerships to provide social services with Hope Clinic, the Gingerbread House children’s advocacy center, Court Appointed Special Advocates, Meals-on-Wheels of Johnson and Ellis Counties and other service organizations.
“It was interesting to see all of this through their eyes,” Adams said. “They’re interested in the well being of the community, in our health care and our transportation. … We have a conservative population here and we represent them as their officials, and they (Moody’s and Fitch) recognized that conservative philosophy in both the community and its leadership.”
All factors combined to impress the two ratings companies, with Adams saying, “It gave them a confidence level that we can pay this debt back.”
Adams said he wanted to express his appreciation to the county’s elected officials and employees for their hard work and contributions to the financial picture presented to the ratings companies.
“This is the completion of a long-term plan,” Adams said. “There are a number of factors that played into it, including the sound, conservative fiscal policies that have been established in the last five years, such as reducing the tax rate, managing funds carefully and implementing objective measures in our budget process.”
In particular, he said he wanted to thank Navarro for his work as county auditor, county administrative assistant Holly Davis for her work on the budget, county planner Barbra Leftwich for her work on infrastructure and financial advisor Jim Sabonis of First Southwest for his assistance in making the presentations to Moody’s and Fitch.
Next step for the county is Monday, when a market price on the bonds will be determined, with Navarro saying that will determine how much payments will be, the amortization schedule and the net investment cost.
In a unique opportunity, local investors will be able to contact their broker to reserve bonds. Adams said he expects that opportunity to be offered the day before the bonds actually go on sale.
More information about the opportunity for local investors to become involved will be made available in the near future through local newspapers and on the county’s Web site.
“Bonds will be sold in increments of $5,000, so it is something that the community can play a part in if they so choose,” Navarro said.
The more you know: Bond ratings
What is a bond rating?
A bond rating performs the isolated function of credit risk evaluation. While many factors go into the investment decision-making process, the bond rating is often the single most important factor affecting the interest cost on bonds.
Who does the rating?
There are three major rating agencies for municipal bonds: Fitch Ratings, Moody’s Investors Service and Standard & Poors.
In assigning a rating for general obligation bonds, the rating agencies assess these factors: economy, debt structure, financial condition, demographic factors and management practices of the governing body and administration. The rating incorporates scientific (mathematic) as well as subjective analysis.
- information from WM Financial Strategies
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