Thu09182014

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King George gets financial ratings upgrade to ‘AA’

The King George Board of Supervisors got good news last week from Travis Quesenberry, county administrator, who informed them the financial rating agency Fitch Ratings has upgraded the county’s bond rating.


The county’s rating has gone up from ‘AA-’ to ‘AA.’
The news was provided at the meeting on Feb. 24, with Quesenberry saying it had come in just prior to the meeting.

The Fitch Ratings upgrade letter for King George provided a three page analysis. The letter can be found online by pressing here.

The release from Fitch was distributed that also indicated the county’s Rating Outlook is revised from Positive to Stable.

In addition, the Fitch upgrades included the King George Economic Development Authority’s (EDA) $1.5 million lease revenue bonds, series 2004, from ‘A+’ to ‘AA-’.

Two supervisors commented on the news.

Chairman Joe Grzeika told Quesenberry, “I want to commend you and your staff for working through this.” He added, “This is another objective demonstration of how this county is being run and managed. I think it speaks highly of our professional staff and this board over the years, and the issues and how we’ve handled them.”

Grzeika also said, “I think we have done a good service for our community, and the community benefits in reduced interest costs. This is important. To get an upgrade in this environment is pretty significant.”

Supervisor Dale Sisson agreed and added, “I don’t know what the percentage is of folks across the nation receiving upgrades right now, but it’s very small.”

Grzeika concurred, adding, “Also, there are not many localities this size that even has its own bond rating. We are unusual in that regard, that we are able to pass the test to get that. So I think it’s a credit to the whole county and it does benefit the whole county in everything that we do, as we hear about new projects and new items that we need to address. These are things that make all that possible. So this is good news.”

 

RATINGS DRIVERS
The Fitch Ratings letter notes that the county’s upgrade, “reflects the county’s strong fiscal discipline and economic stability as evidenced by the maintenance of high liquidity and reserve levels, prudent investment in capital improvements, and strong economic and employment metrics despite the challenges posed by sequestration.”

Declining debt is another driver of the rating upgrade.

The Fitch Ratings letter points out the county’s declining debt, noting that overall debt levels are moderate and amortization is below average at 46.8 percent of principal retired within 10 years. Fitch also notes, “The county has no intentions of issuing debt to finance its modest $21 million fiscal 2014 to fiscal 2018 capital improvements plan.”

It also adds, “Debt services costs are manageable at 12.3 percent of governmental spending.”

It is noteworthy that the annual debt service is declining due to refinancing opportunities taken to lower interest rates.

The county does not rely on real estate taxes to fund its debt service. It has a dedicated annual source of revenue for the county debt service of about $6.8 million from landfill host fees.

The county has been able to refinance its capital debt due to its strong financial ratings.

Of the county’s capital debt, the Fitch letter notes, “Approximately 70 percent of debt service costs are due to school debt.”

(Note: The Fitch Ratings upgrade letter for King George can be found by pressing here.)

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