County’s Credit Rates High Marks : Finances: Moody’s Investor Services reports the region’s long-term economic prosperity is assured.
Ventura County, despite an anticipated $16-million budget shortfall in fiscal 1991, earned the highest possible marks from a national credit-rating company in a report completed last week.
While suffering the effects of the ongoing recession, enlightened financial planning and a strong regional economy ensure Ventura County’s long-term prosperity, according to an annual credit report by Moody’s Investor Services Inc. of New York.
The credit report, prepared in anticipation of a $50-million treasury note that will be put on sale July 1, rated Ventura County among the safest short-term borrowing institutions in the state.
The county issues treasury notes every year to cover cash-flow problems between its April and December property tax collection dates. Property taxes made up $133 million of the county’s $406-million budget last year.
“The county’s satisfactory financial position has been supported by a growing, diversified economy, with growth concentrated in the southern portions of the county nearest to Los Angeles,” said the report, which also praised the county’s conservative spending policies.
The county’s short-term financial problems should be overcome once the economy rebounds from the current recession, the report said.
County officials said they were elated with the report.
“Obviously we’re very pleased,” said Tom Mahon, county assistant auditor controller. “It reflects very favorably on the work of the Board of Supervisors and the management staff. Their sound, conservative policies enabled us to get these kind of ratings.”
Financial analysts said that while top credit ratings are not uncommon for California counties, Moody’s ringing endorsement of Ventura County’s economy is unusually optimistic for a recession year.
“A report like that is rare news in 1991, when you have so many counties facing a fiscal crisis,” said Deborah Vrana, senior editor of California Public Finance, a weekly trade publication.
On the strength of the Moody’s report and an equally favorable credit rating by Standard & Poor’s, another New York-based firm, the county was able to market its notes at 4.6%, which is 0.1% below the going market rate.
By preserving its top rating, the county saved $300,000 to $400,000 in interest payments at a time when other counties’ credit ratings are slipping, said Richard Wittenberg, county chief executive officer.
Officials at Moody’s and Standard & Poor’s said the county’s overall economic strength was its biggest asset.
“The ratings are long-term,” said Nikolai J. Sklaroff, a senior analyst at Moody’s. “They do not gyrate with economic cycles, such as the one produced by the current recession. In fact, they try to see through such short-term cycles.”
The Moody’s report cited “adequate cash balances, favorable historical performance compared to prior year projections, moderate borrowing amount and the availability of substantial reserve amounts” as the reasons the county provides “the highest quality security” for its treasury notes.
In praising the county’s financial management, the report pointed to the county’s decision to impound $1.2 million in jail booking fees, which are the subject of a legal dispute.
“Almost all the other counties spent that money already, and if they have to give it back, it will hurt their taxpayers,” Mahon said. “We didn’t budget the booking fees. If we get to keep them, it will be fresh money.”
The report also noted the county’s economic diversity and growth patterns:
“Agriculture remains a vital contributor to the local economy . . . . County development policies, which have concentrated growth in incorporated areas, while preserving the county’s open areas, have helped preserve much of the agriculture, which has been lost to development in other counties.
“Oil and military employment are other significant components of the county economy, although growing service employment has provided diversification.”
However, the county is feeling the effects of the recession, the report said. Property taxes and revenue growth “are substantially below the double-digit growth rates of the previous three years . . . . Housing sales, which have dropped, are reportedly increasing again.”
While the county’s year-end $19.7-million reserves are “down sharply from the $32.4-million beginning balance, it is nevertheless an adequate margin,” the report concluded.
Revenue shortfalls due to the recession have been offset by $4 million in budget cuts this year and 5% to 10% cuts requested from departments as part of the fiscal 1992 budget process, the report said. Moreover, the county has set aside $44.6 million in Risk Management funds, an emergency reserve available in the event of a short-term general fund shortfall.
“We’ve proven that we can take cuts and we’re prepared to deal with budget cuts,” Wittenberg said.
