S&P Drops DeKalb to BBB

Standard & Poor’s Monday lowered its long-term rating on DeKalb County, Ga.’s general obligation bonds to BBB from AA-minus.

The agency also lowered the county’s appropriation-backed debt to BBB-minus from A-plus, and its water and sewer revenue bonds to AA-minus from AA-plus.

The downgrade reflected years of deficit operations that weakened liquidity and led to a negative fund balance in DeKalb’s major operating tax funds, and a negative cash position as of Dec. 31, which necessitated internal fund borrowing to make GO debt-service payments on Jan. 1, said a report by analyst Andrew Teras.

The county also lacked procedures to guide cash management across funds and was not prepared to make timely budget adjustments to offset the structural imbalance, he said, noting that the County Commission for the past two fiscal years has rejected proposed tax hikes to mitigate budget pressures.

“Following its lowering of the ratings, Standard Poor’s withdrew its ratings on the county’s GO and appropriation-backed debt, reflecting its view of county officials’ inability to provide sufficient and consistent information regarding the county’s current liquidity position and how they will manage projected cash-flow imbalances in the near term,” Teras wrote.

In December, Moody’s Investors Service lowered the GO bond rating on Georgia’s third-largest county — which includes a portion of Atlanta — for the second year in a row, citing similar structural budget problems.

Moody’s dropped DeKalb’s GO rating to Aa3 from Aa1 and downgraded the county’s appropriation-backed debt to A1 from Aa2.

At the time, the county’s interim finance director, Joel Gottlieb, said officials had begun taking actions to help build reserves and address internal budget issues.

He said officials were reviewing additional ways to cut expenses and considering different fees and charges to raise revenue.

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