As counties across California sink deeper into debt, Ventura County has emerged as the community with the strongest financial standing, according to a study of the state's 14 largest counties.
Ventura County's low debt level, coupled with a $34-million revenue surplus in last year's budget, puts the county at the top of the list, a San Francisco-based investment banking firm concluded.
"Ventura County basically had very good scores across the board," said Jean Buckley, a vice president with the firm Prager, McCarthy & Sealy.
County officials hope that the high marks will translate into lower interest rates on future borrowing--and lower costs for taxpayers.
County Auditor-Controller Thomas O. Mahon plans to use the report to argue for improved credit ratings. Already, bond buyers and analysts have begun calling Buckley for information on the report.
"The fact that Ventura County comes out on top certainly validates their good credit ratings," she said.
Buckley used a formula, involving 17 economic and fiscal factors, to assess the credit standing of the state's most populous counties. What she found, overall, was a "worsening debt burden" with a 75% increase in net direct debt per capita.
"At the same time that debt burdens have been increasing, California's counties have experienced diminished financial flexibility," according to the study. Many counties have little money left over at the end of the budget year for unexpected costs.
Ventura County, on the other hand, had $34 million on hand when the fiscal year ended in June, Mahon said. That money was funneled back into the new year's budget.
"The county does a good job of managing its finances and making sure that all the (fiscal indicators) are strong," Supervisor John K. Flynn said.
Beyond the healthy surplus, Ventura County scored consistently high in Buckley's study, except in population growth.
But Mahon said the county's relatively slow-growing population is one of the factors that has kept it out of debt. Faster-growing communities, such as San Bernardino and Riverside counties, must invest heavily in new roads and schools to keep up with new residents.
Mahon also credited the county with a cautious approach to borrowing.
For instance, he said, Ventura County typically opts for 15-year bonds on projects, rather than 30- or 40-year debt plans used elsewhere. "In effect, what we're doing is paying it off in half the time," he said.
"The county is basically quite conservative. I don't like debt."
The county's debt burden would undoubtedly grow if the Board of Supervisors proceeds with plans to build a new $38-million wing and parking lot at Ventura County Medical Center, Buckley said.
Bond buyers typically want a higher interest rate on bonds used to pay for hospitals, she said. "The (counties) pay more for their hospital debt than they would for a jail or other projects," Buckley said. "Hospitals are not viewed as the most essential projects for a county."
Still the project, alone, would not knock Ventura County out of its secure credit position, she said. The No. 2 county in her study, Contra Costa in Northern California, has already issued bonds for a new hospital.
A good credit rating, validated by national analysts, could save the county hundreds of thousands of dollars over the life of a construction project.
Basically, when the county wants to borrow money, it sells bonds, then pays back the buyers at a certain interest rate. The credit rating determines, to some extent, how high the interest runs.
A good rating indicates a low-risk investment, so buyers are willing to accept lower interest rates for calculating repayment. That results in the county and taxpayers having less money to repay.
Right now, the county has an A+ rating from Standard & Poor's rating group and A1 from Moody's Investors Service Inc. Mahon hopes to upgrade the rating to AA with Standard & Poor's. The highest possible rating is AAA.