CHICAGO — Dane County — home to Wisconsin’s capital city of Madison — lost its AAA general obligation rating from Fitch Ratings as it grapples with operating deficits that city officials hope to reverse next year.
Fitch lowered the county’s rating one level to AA-plus and assigned a negative outlook to the credit. Moody’s Investors Service affirmed the county’s Aa1 rating and stable outlook.
The county on Thursday will take competitive bids on three series of refunding bonds — $17 million of taxable bonds that will restructure upcoming maturities tied to pension obligation debt, a $20.3 million tax-exempt series, and a $24.5 million tax-exempt series.
“The county is taking advantage of interest rates to lower costs,” said Dawn Gunderson of Ehlers & Associates, which is advising the county on the sale.
The county plans to follow up the refunding issues with the competitive sale on Nov. 4 of two series of new-money bonds for $14.5 million and $7.7 million, both of which are expected to sell as taxable Build America Bonds. Proceeds will finance various capital projects.
Fitch’s downgrade affects the upcoming issues and $156.2 million of outstanding GO debt. The downgrade reflects the multi-year deterioration of the county’s general fund balance and “the outlook revision reflects the county’s ongoing challenge to realize reoccurring net-operating general fund surpluses, erase its general fund unreserved deficit, and build reserves,” analysts wrote.
Dane County benefits from a low unemployment rate — 5.4% in August — compared to the state and national averages, strong wealth levels among its growing population, and a diverse economic base that is supported by government, education and health care. Along with the state capitol, Madison is home to the main University of Wisconsin campus.
While those factors have helped Dane escape the more severe effects of the recession felt by some of its counterparts, it’s still taken a toll on the county’s financial position. It has experienced general fund operating deficits for the past four consecutive years resulting in a negative $3.8 million unreserved general-fund balance in fiscal 2009 despite spending cuts.
Dane increased its property tax levy for 2010, cut 24 positions and salaries by 3%, and had hoped to end 2010 with balanced operations with the aid of a $5.4 million one-time fee from the construction of an electrical transmission line. It was delayed and the county won’t receive the payment until 2011, resulting in an expected $3.1 million operating deficit for 2010.
Dane County Executive Kathleen Falk’s proposed 2011 budget is balanced with a 3% increase in property taxes and a 5% reduction in costs. It relies on $6.6 million in non-recurring revenues and an anticipated 1% increase in sales tax collections.