Wayne County, Michigan, gets another upgrade
Wayne County, Michigan, received an upgrade from Fitch Ratings, cementing its credit rating two steps higher in investment grade territory.
Fitch upgraded the county’s rating to BBB-plus from BBB-minus citing its moderate long-term liability burden and strong financial resilience, underpinned by a weak revenue framework and solid expenditure flexibility. The rating outlook is stable.
“Actions taken under the county's recovery plan successfully improved the county's structural balance and long-term liability profile and thus improved its ability to withstand a future economic downturn,” Fitch said.
The upgrade gives a boost to $72.3 million of outstanding limited tax general obligation bonds, $30 million of stadium refunding bonds issue by the Detroit-Wayne County stadium authority and $180.2 million of lease rental bonds issued by the Wayne County Building Authority.
“This upgrade by Fitch further demonstrates that Wayne County’s recovery plan has led to a sustainable, efficient government and built the foundation for the long-term rebuilding of the county," Wayne County Executive Warren C. Evans said. "We have reduced our long-term liabilities, developed a reserve, and we are better prepared to weather future economic downturns. This upgrade reflects that reality.”
This is the second upgrade to come in the last three months for the county, which just four years ago faced a financial crisis. In September Moody’s Investors Service upgraded Wayne County’s issuer credit rating to Baa1.
The county exited state oversight in 2016 and a series of upgrades restored its investment grade ratings.
The county entered the consent agreement in August 2015. The pact allowed the county to work with the state to renegotiate contracts, improve its cash position, and reduce underfunding in the pension system, resulting in the elimination of a structural deficit.
Fitch said that recent and planned supplemental pension contributions further support budgetary sustainability. In fiscal 2018, the county deposited an extra $85 million to the pension system, over and above the actuarially determined contribution, with $20 million of the excess contribution coming from the general fund, $5 million from road funds, and more than $50 million from the sale of the Downriver and Northeast Sewer Disposal Systems.
Since taking office in 2015, Wayne County Executive Warren C. Evans' administration has eliminated a $52 million structural deficit and an $82 million accumulated budget deficit, delivered four consecutive budget surpluses, and increased Wayne County's pension funding from 45% to 61%. The county achieved essentially balanced operations in fiscal 2018, resulting in an unrestricted general fund balance of about 26% of spending.
“The county's financial operations have been structurally balanced since fiscal 2016,” Fitch said. “The current level of reserves represents a strong cushion to absorb what Fitch believes could be severe revenue shortfalls in another recession.”
The upgrades come as Evans looks to renew his push for a regional transit initiative, after a $5.4 billion, 20-year transit plan backed by Evans’ administration failed to gain traction when Oakland and Macomb Counties pulled out of the regional proposal.
The new proposal would rely on legislation to allow for a regional transit agreement between Detroit and Washtenaw, Wayne and Oakland counties ahead of a ballot proposal in which the counties would ask voters to approve a property tax increase to fund the agreement.