Wayne County Dropped to Low Single A by Fitch, Moody’s

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CHICAGO — Fitch Ratings and Moody’s Investors Service hit Wayne County, Mich., with dual downgrades to the low single-A category last week as it prepares to sell $200 million of recovery zone economic development bonds Wednesday.

The county will use the proceeds to build a new consolidated county jail building in downtown Detroit. A final tax-exempt borrowing for the facility is expected sometime next year.

The county currently operates three jails and hopes to save money by consolidating services and costs at one facility, said chief financial officer Carla Sledge.

Officials are also mulling a new court building that would share the site for a new large criminal justice complex. The county board in late October gave preliminary approval to borrowing another $400 million to consolidate the county courts.

The jail bonds are secured by the county’s general obligation limited-tax pledge. Wayne County is Michigan’s most populous county. It includes Detroit, which makes up about 22% of the county’s $101 billion tax base, according to Moody’s.

The borrowing will include serial bonds and two sets of term bonds, and features a final maturity of 2040 and three years of capitalized interest, according to ­Freda Johnson, president of Government ­Finance Associates Inc., the county’s financial adviser.

JPMorgan is senior manager. ­Miller, Canfield, Paddock and Stone PLC is bond counsel. The Wayne County ­Building Authority is issuing the debt.

Moody’s cut its rating on the county’s GO debt to A3 from A2 and assigned a negative outlook. Fitch downgraded the credit to A-minus from A and also maintains a negative outlook. Standard & Poor’s gives Wayne an A-minus rating. 

Analysts warned that the county faces economic and financial pressures that have led to fund deficits, thin liquidity, and depleted reserves. Fitch and Moody’s also said the county must resolve an ongoing dispute with the Third Circuit Court System over the court’s budget.

The courts sued the county over budget cuts and won. The county is now obligated to budget for 110 new positions and various capital improvements to court facilities.

Sledge said negotiations with the courts remain ongoing and that so far the courts have not asked for the 110 new positions. “They are interested in settling this, and if that were to be the case, then a lot of the pressure would be taken off the county,” she said.

The county has $445 million of outstanding limited-tax GO debt, $44.7 ­million of GOs issued by the Building Authority, and $70.2 million of stadium bonds issued by the Detroit-Wayne County Stadium Authority.

“Clearly we’re disappointed that we did get the downgrades, but all three ratings remain in the A category and we’re pleased about that,” Johnson said.

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Michigan
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