Citing a weakening credit profile, Moody’s Investors Service last week revised its outlook to negative from stable on $314.2 million of outstanding debt issued by Cuyahoga County, which includes Cleveland.
At the same time, the agency affirmed its Aa1 rating on the county’s $208.2 million of outstanding general obligation debt and its Aa2 rating on $106 million of outstanding non-tax revenue debt.
A declining manufacturing economy is taking a toll on the county’s large but stagnant tax base, said Moody’s analyst Thomas P. Schuette in a report accompanying the outlook revision.
Along with Michigan, Ohio is suffering from some of the highest foreclosure rates in the nation.
Cuyahoga County reported that total foreclosures doubled to 7,000 between 1995 and 2000, and nearly doubled again by 2006 to 13,500. Approximately 7% of the county’s total households are in some stage of the foreclosure process, according to county officials.
Despite the county’s struggling economy, Moody’s said it expects financial operations to “remain sound in the near term” due to overall strong financial management. County officials expect a small surplus in fiscal 2008 and healthy reserves. The growth is largely due to a series of spending cuts implemented during the last several years. The county has eliminated about 950 positions since 2001 and expects to cut another 150 positions in 2008.
Cuyahoga recently approved a 0.25% increase in the sales tax to support various capital improvement projects. The increase is expected to raise an additional $43 million in fiscal 2008. Sales tax revenues make up just under 48% of the general fund. The county reported a general fund balance of $162.8 million in fiscal 2006 and a $4.6 million general fund surplus in fiscal 2007.
Moody’s also noted that the county has a healthy debt profile, with a 2.4% debt burden and a direct debt level of 0.2%.
Officials are considering a $120 million bond issue to pay for a variety of capital projects in 2008, including a new juvenile detention facility and courthouse.
Fitch Ratings rates Cuyahoga’s GOs AAA and Standard & Poor’s rates them AA-plus.