Genesee’s Double Drop

Genesee County was hit with a pair of downgrades last week as it prepares to issue $10 million of tax anticipation notes and $46 million of delinquent-tax anticipation notes this month.

Moody’s Investors Service and Standard & Poor’s cut their ratings on the county’s outstanding debt, noting a weakened fiscal position and the habit of tapping reserves for operations over the last several years.

Standard & Poor’s lowered its long-term and underlying rating on the county and the Genesee County Building Authority to A from A-plus. The outlook is stable. Moody’s cut its rating to A1 from Aa3 with a negative outlook on the county’s outstanding limited-tax general obligation debt. The agency also assigned a MIG-1 rating to the note sale, the proceeds of which will be used to provide cash flow for the county’s general fund.

The county has roughly $234 million of outstanding debt. Located 60 miles from Detroit, Genesee County has faced financial challenges tied in part to layoffs in the automotive industry, analysts said.

Its general fund is strained by falling property tax revenue and declining state aid. The county’s general fund reserves declined from nearly 30% of revenue a decade ago to 5.6% in fiscal 2009.

County officials have made cuts to offset falling property tax revenue, and Michigan is expected to reinstate revenue aid to counties this year, though the state’s own weak fiscal position renders that aid uncertain, analysts said.

Despite fiscal strains, the county is considering large borrowing plans in the future, Moody’s said. Its current debt level is low, but the county is considering issuing up to $32 million of bonds to finance parking improvements and projects at its juvenile detention facility.

Officials also are considering revamping their water system at a cost that could reach $600 million, Moody’s said. Currently, the county receives its water from the Detroit Water and Sewerage Department, but it is considering building a separate water treatment plant and pipeline to transport water from Lake Huron.

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