After years of record budget deficits and a sinking economy, Macomb County has received some good news from Wall Street, where it was awarded one of the top financial rankings in the nation.
Standard & Poor’s has maintained the top bond rating of AAA for Macomb, a decision which will have an immediate impact on the cost of financing a huge sewer repair project. The ratings agency said it was impressed with the county’s fiscal turnaround, including a projected budget surplus of $5 million to $7 million for 2009.
The AAA bond rating comes despite an ongoing budget crisis due to a collapse in the local housing market that has produced an estimated 33 percent drop in tax revenues. Due to budget reforms and reductions, employee concessions, hiring freezes and a tax hike, the county Board of Commissioners wiped out the deficit projected for ‘09 and established a balanced budget for this year.
However, the county still faces an estimated $23 million deficit for 2011 that will require more cutbacks.
In a financial analysis, S&P said that Macomb’s economic outlook is “stable” and the county has several strengths: a solid economic base, a healthy “rainy day” fund, an impressive tax-revolving fund to compensate for property taxes that become delinquent, a moderate debt burden, and good management practices.
“We recognize the challenging economic and revenue climates, but (these) strengths, plus management’s history of making budget adjustments to close the gap created during the downturn, support our affirmation of the ratings,” said the S&P report.
Of the 3,068 U.S. counties, Macomb is one of just 67 with an AAA rating, including three in Michigan.
The figures for the 2009 Macomb surplus are far beyond previous projections, which indicated that budget reductions, particularly a sharp cut in county funding for the Martha T. Berry Medical Care Facility, could result in a ‘09 excess of $2 million to $3 million.
Once the final numbers are calculated, the surplus will be added to the updated value of the rainy day fund.
In December, the other major ratings agency on Wall Street, Moody’s Investor Service, downgraded the county’s bond rating one notch, to Aa1. That generated fears that long overdue improvements to the Oakland-Macomb Interceptor, a massive sewer pipe that serves both counties, would become more costly. A 20-year bond issue to finance the project could cost an additional $8 million over a 20-year period if Macomb’s bond rating was lowered, according to one expert.
Critics of the Board of Commissioners had predicted that S&P would follow suit and lower the county’s bond rating.
But county officials received the good news Friday about S&P’s decision, which should keep the sewer project’s financing costs low and assist any future projects.
A contingent of county officials met with S&P representatives in Chicago on March 1. Former longtime county finance director Dave Diegel was hired on a temporary, contractual basis to prepare and deliver a presentation about Macomb’s fiscal and economic situation.
The sales pitch, according to Commissioner Brian Brdak, chairman of the board’s Budget Committee, asserted that the county has been “under new management for the last two years, we’ve made the hard decisions, we’ve righted the ship.”
County board Chairman Paul Gieleghem agreed with his fellow Democrat from New Baltimore.
“The message from Standard & Poor’s is, in spite of the downturn, Macomb County is a blue-collar county that is holding its own,” said Gieleghem, a Clinton Township Democrat. “We’re a hard-working county, we’re not a wealth county, but we have a solid work ethic and we have our strengths.”
