BROOKSVILLE — Despite high unemployment, falling property tax revenues and the need to dig into reserves to offset budget shortages, Hernando County has still earned top bond ratings from leading bond rating companies.
The ratings were requested as Hernando County prepares to refinance two old bond issues totaling $10 million, a move that will save the county an estimated $500,000 over the life of the bonds.
Bond refinancing is like home owner refinancing for the advantage of a lower interest rate, explained county finance director Amy Gillis.
"The better the rating on this bond issue, the more the savings," she said.
Hernando County received a bond rating of A from Standard and Poor's and a comparable A2 from Moody's for the refinancing. Moody's also affirmed the county's overall A1 rating and its "stable outlook."
Those kinds of positive ratings and the details of why Hernando, despite the adverse financial atmosphere, has remained stable are important as investors decide whether to put money into a bond issue, said George Zoettlein, director of the county's office of management and budget.
Bond rating companies look at a variety of factors as they determine ratings. The Moody's report notes that Hernando County has a low percentage of debt for its budget and has a healthy reserve even though county officials have decided to take $3 million a year over three years from the reserves to offset falling property tax revenues and other revenue shortfalls.
"The planned drawdown of reserves is a prudent decision," Gillis said, noting that the bond rating firms look favorably on the fact that the county has an adopted reserve fund policy mandating an 18.5 percent reserve, a percentage of available money that will still be available after the drawdown.
"The A2 rating reflects the county's significant amount of available non ad valorem (property tax) revenues that have grown 11.1 percent in the last five years (including declines of 6.9 percent and 4.8 percent in fiscal 2008 and fiscal 2009, respectively) and favorable underlying credit characteristics," the Moody's report states.
"The A1 issuer rating and stable outlook incorporate the county's sound financial position supported by strong reserve levels and adopted fiscal policies, large tax base and modest debt profile."
"They consider whether the county has been fiscally prudent, and the county has been fiscally prudent," she said.
"It means we're doing a good job," Zoettlein said.
The Moody's report also predicts an economic improvement in 2011.
Considering Hernando as part of the overall Tampa Bay area, the report states, "a favorable industrial structure, a hefty pipeline of stimulus projects and forthcoming hiring for the federal government's decennial census will enable Tampa to emerge from recession late next spring."
The report goes on to state, "In the long term, its robust demographic trends will create heady demand for housing and services."
Zoettlein expressed some question about whether Hernando will be part of that because of the inventory of available homes but added, "I guess they've got the economists so they should know."
"This is welcome news that reaffirms the solid fiscal management of the county's resources through the long-standing cooperation of the Clerk of the Court and the Board of County Commissioners," County Administrator David Hamilton was quoted as saying in a statement Wednesday.
"Prudent investments along with management debt loads have placed Hernando County in an advantageous position compared to numerous other governments throughout the nation."
Hernando officials are deep into budgeting for the 2010-11 fiscal year and they are predicting additional cuts in expenditures.
The budget process this year will involve sorting out the county's functions based on what services must be provided by law and what services are not required to be provided. Those will be considered for elimination, Zoettlein said.
Barbara Behrendt can be reached at [email protected] or (352) 848-1434.