Web page
link:
http://billjames.org/ListBuilder/2009/2009-1-23%20-%20Rating%20Agency%20slams%20Mecklenburg%20over%20Debt.htm
Here's
the
Scoop:
Fitch
(a
National
Rating
Agency)
left
the
County's
bond
ratings
the
same
(AAA
for
General
Obligation
Bonds
and
one
notch
lower
at
AA+
for
COPS).
That
would
seem
to
be
good
news
and
a
casual
read
of
the
first
couple
of
paragraphs
of
the
Press
Release
would
lead
folks
to
think
that
Fitch
thinks
Mecklenburg
County
is
in
pretty
good
shape
and
has
bond
levels
that
are
generally
OK.
A
detail
read
of
the
release
however
contains
a
series
of
explicit
statements
that
should
sober
up
even
the
most
drunk
of
those
that
are
downing
shots
of Mecklenburg
County
bond
dollars.
So
what
did
the
rating
agency
say
about
Mecklenburg
County
that
is
so
bad?
Well,
here
are
a
few
quotes:
-
Mecklenburg
County's
debt
levels
are
"
are
inconsistent
with
such
a
highly
rated
credit"
(My
note:
We
should
be
downgraded
this
year but
they
are
going
to
warn
us
first)
-
We
have
a
'liberal'
debt
policy
(My
note:
They
got
that
right.
It
is
so
'liberal'
in
fact
that
there
hardly
isn't
one).
-
"The Stable Rating Outlook incorporates Fitch's assumptions that the debt burden will remain well within ceilings outlined in the county's new policies" (My note: this is impossible if we issue all planned debt we have promised CMS and others),
-
"The Stable Rating Outlook incorporates Fitch's assumptions that variable rate exposure, including hedged debt, will be contained at current levels" (My note: We are already at about 33% 'variable' which is more than what NC good practices would dictate as a 10% maximum).
-
"Fitch believes the guidelines embody liberal debt burden and debt service spending targets relative to other highly-rated entities; the county contends that the high ceilings provide flexibility and that actual ratios will be below the guidelines." (My note: According to projections, if we issue what CMS and other groups want in terms of debt, we will EXCEED the revised guidelines in a few years).
-
"The fiscal years 2009-2018 capital improvement plan identifies general county projects that total approximately $2.6 billion, although there is no indication that the county will fund the entire requested amount." (My note: Most of that is CMS debt. Who said we weren't going to be issuing this debt over the next 10 years? Did we tell them we were not?)
-
"Assumed school debt authorization of $350 million every other year is under reconsideration".
That
last
statement
about
reducing
the
amount
of
'school
debt
authorization
below
$350
million
every
OTHER
year
would
effectively
kill
CMS'
issued
10
year
capital
plan
'black
flag
dead'
(to
borrow
a
phrase
from
former
County
Commission
Chair
Tom
Bush).
What
is
surprising
about
this
statement
is
that
the
Board
of
County
Commissioners
has
refused
to
engage
in
any
'reconsideration'
or
limit.
I
have
been
trying
to
get
the
Democrats
on
the
Board
to
consider
this
for
10
years
as
debt
spiraled
out
of
control.
If
this
'reconsideration'
is
in
process
then
how
far
along
is
it?
How
much
are
we
reducing
CMS'
debt
access
to?
Is
CMS
aware
of
this
'reconsideration'
and
are
they
participating
in
it?
Is
this
the
real
reason
behind
the
'lower'
sale
amount
- to
restrict
CMS
bond
money
without
having
to
confront
them?
Hmmm.......
-
Two
years
ago
CMS
received
$147
million
(approx)
in
bonds
(that
would
be
roughly
$300
million
every
two
years).
-
A
year
ago
we
issued
roughly
$197
million
in
bonds
for
CMS
(that would
translate
to
about
$400
million
every
two
years).
-
This
year
CMS
wanted
around
$270
million
(that
would
translate
to
$540
million
every
two
years).
So............if
CMS
wants
a
bond
issue
of
$500
million
every
two
years
(as
Peter
Gorman
has
stated)
for
'the
children'
how
does
Mecklenburg
County
accomplish
that
if
we
have
agreed
to
'reconsider'
and
limit
our
CMS
sales
to
less
than
$350
million
every
two
years?
Fitch
has
stated
the
obvious.
Mecklenburg
County's
debt
levels
are
'inconsistent
with
such
highly
rated
credit'.
They
are
telling
us
to
fix
our
problems.
It
is a
shot
across
the
bow
of
the
County
Commission.
The
question
is -
Will
the
Democrats
listen
and
fix
the
problem
and
impose
a
hard
debt
limit?
_____________________________________________
Fitch
Assigns
'AA+'
to
Mecklenburg
County,
NC
$91MM
COPs;
Stable
Outlook
18:10
EST
Tuesday,
January
13,
2009
NEW
YORK
(Business
Wire)
--
Fitch
Ratings
assigns
a
rating
of
'AA+'
to
Mecklenburg
County,
North
Carolina's
$90,765,000
certificates
of
participation
(the
COPs),
series
2009A
Mecklenburg
County.
The
COPs
are
scheduled
to
sell
via
negotiation
on
Jan.
28,
2009.
In
addition,
Fitch
affirms
outstanding
county
obligations
as
follows:
--$1.76
billion
general
obligation
(GO)
bonds
at
'AAA';
--$518
million
COPs
at
'AA+'.
The
Rating
Outlook
for
all
obligations
is
Stable.
The
'AA+'
rating
on
the
COPs
reflects
the
solid
legal
provisions,
the
essentiality
of
the
mortgaged
property,
and
the
fact
that
COPs
payments
are
subject
to
annual
appropriation.
The
long-term
'AAA'
GO
rating
reflects
the
strength
of
the
county's
broad
and
expanding
economy,
as
well
as
its
strong
financial
performance
and
management.
The
rating
also
incorporates
debt
ratios
considered
high
for
the
rating
category,
attributable
to
sustained
aggressive
borrowing
program
to
fund
significant
capital
needs
coupled
with
the
overlapping
debt
of
the
city
of
Charlotte.
The
county
recently
revised
its
debt
policies
to
reflect
actual
debt
levels
that
were
no
longer
in
compliance
with
the
prior
policy.
Fitch
believes
the
new
policies
will
provide
guidance
on
an
acceptable
debt
burden
going
forward.
The
county's
minimal
pension
and
OPEB
liabilities,
conservative
budgeting
for
debt
service
and
ample
reserve
levels
partially
offset
concerns
regarding
the
county's
debt
profile.
The
Stable
Rating
Outlook
incorporates
Fitch's
assumptions
that
the
debt
burden
will
remain
well
within
ceilings
outlined
in
the
county's
new
policies,
and
that
variable
rate
exposure,
including
hedged
debt,
will
be
contained
at
current
levels.
Changes
in
these
assumptions
could
result
in
negative
credit
action.
The
current
COPs
offering
will
be
used
primarily
to
fund
schools
and
to a
limited
extent
other
county
capital
improvements.
Under
an
installment
financing
agreement,
the
county
will
make
payments,
subject
to
annual
appropriation,
equal
to
debt
service
to
the
Mecklenburg
County
Public
Facilities
Corporation
(the
corporation),
a
nonprofit
entity.
Mortgaged
property
conveyed
under
the
deed
of
trust
for
the
benefit
of
the
corporation
includes
two
new
middle
schools,
whose
essentiality
provides
sufficient
incentive
to
appropriate.
With
the
financial,
business
and
professional
services,
and
communications
sectors
playing
a
large
role,
Mecklenburg
has
a
diverse
economy.
Anchored
by
the
city
of
Charlotte,
Mecklenburg
is
the
second
largest
financial
center
in
the
U.S.,
with
more
than
85,000
finance-related
jobs
produced
by
institutions
with
assets
exceeding
$3.3
trillion.
The
county
projects
that
this
sector
will
remain
strong
even
after
the
completion
of
the
recent
acquisition
of
one
of
its
largest
employers,
Wachovia
Bank,
by
Wells
Fargo
&
Company.
Fitch
will
continue
to
monitor
ramifications
to
the
county
of
the
proposed
acquisition
as
well
as
the
impact
of
changes
throughout
the
financial
services
industry.
The
diverse
economy
includes
more
than
320
Fortune
500
companies
and
a
growing
presence
in
the
tourism,
high-technology
manufacturing,
energy
production
and
logistics/distribution
sectors.
Wealth
levels
are
above
state
and
national
averages.
Unemployment,
which
has
traditionally
been
at
or
below
the
state
and
national
averages,
has
risen
in
tandem
with
the
state's
although
more
sharply
than
the
nation's
over
the
past
year,
with
the
county's
7.7%
November
2008
unemployment
marginally
below
the
state's
7.8%
but
well
above
the
nation's
6.5%.
Strong
long-range
financial
planning
and
comprehensive
policies
have
enabled
Mecklenburg
to
manage
its
growth-related
financial
needs
within
the
constraints
of
its
budget.
Audited
fiscal
2008
results
reflect
continued
operating
gains
and
maintained
the
county's
unreserved
general
fund
balance
at a
high
20.2%
of
spending.
The
unreserved
balance
has
increased
by
147%
since
fiscal
2002.
The
county
projects
a
draw-down
of
general
fund
balance
in
fiscal
2009
after
transfers
out
for
pay-as-you-go
capital
financing
and
capital
reserve
funding.
Reserves
remain
strong
in
spite
of
high
levels
of
debt
service
spending,
which
reached
17.7%
of
expenditures,
transfers
out,
and
other
uses
in
fiscal
2008.
The
county
revised
its
debt
policies
in
the
summer
of
2008,
in
recognition
that
it
would
not
be
able
to
adhere
to
previous
targets
given
sizable
upcoming
capital
needs.
Fitch
believes
the
guidelines
embody
liberal
debt
burden
and
debt
service
spending
targets
relative
to
other
highly-rated
entities;
the
county
contends
that
the
high
ceilings
provide
flexibility
and
that
actual
ratios
will
be
below
the
guidelines.
Additionally,
the
guidelines
institutionalize
Mecklenburg
County's
maximum
permitted
unhedged
variable
rate
debt
exposure
at
35%
of
the
total
and
do
not
limit
synthetically
fixed
rate
debt,
which
Fitch
views
with
concern
as
potentially
weakening
the
county's
debt
profile.
Current
direct
debt
ratios
are
in
compliance
with
the
revised
targets.
Overall
debt
levels,
at
$4,321
per
capita
and
3.9%
of
market
value,
are
still
moderate
but
are
inconsistent
with
such
a
highly
rated
credit;
these
levels
would
rise
to
$4,613
per
capita
and
4.1%
of
market
value
should
the
county
complete
a
forthcoming
$253
million
GO
issuance.
Debt
amortization
is
above
average
even
with
the
full
GO
issuance,
about
65%
in
10
years,
in
compliance
with
county
policy.
The
fiscal
years
2009-2018
capital
improvement
plan
identifies
general
county
projects
that
total
approximately
$2.6
billion,
although
there
is
no
indication
that
the
county
will
fund
the
entire
requested
amount.
Assumed
school
debt
authorization
of
$350
million
every
other
year
is
under
reconsideration.
A
recently
adopted
pay-as-you-go
financing
policy
should
increase
the
current
$26
million
pay-go
funding
to
$52
million
per
year
beginning
in
fiscal
year
2010.
Fitch
will
monitor
compliance
with
new
policies,
and
would
consider
negative
credit
action
were
the
county
to
exceed
current
projections.
Fitch's
rating
definitions
and
the
terms
of
use
of
such
ratings
are
available
on
the
agency's
public
site,
www.fitchratings.com.
Published
ratings,
criteria
and
methodologies
are
available
from
this
site,
at
all
times.
Fitch's
code
of
conduct,
confidentiality,
conflicts
of
interest,
affiliate
firewall,
compliance
and
other
relevant
policies
and
procedures
are
also
available
from
the
'Code
of
Conduct'
section
of
this
site.
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Business
Wire
