BRADENTON, Fla. - Walker County, Ga., officials asked Standard & Poor's to withdraw its ratings on the county's 2008 bonds after disagreeing with a recent four-notch downgrade to BBB-plus, according to the county's investment banker.
"This is a bond issue that matures Jan. 1, 2015. There are only two payments left," Ed Wall, with Piper Jaffray, said May 12. "We asked Standard & Poor's to withdraw the rating. Moody's still rates the bonds Aa3."
Wall said he also takes issue with S&P's new local general obligation bonds criteria, which were largely responsible for the downgrade.
Standard & Poor's said it lowered ratings on $12.8 million of outstanding GO sales tax bonds to BBB-plus from AA-minus on May 6 based on the implementation of its GO criteria and the county's weak liquidity related to guarantees for liabilities of the Hospital Authority of Walker, Dade, and Catoosa counties. S&P withdrew the rating May 12.
A 1% special purpose local option sales tax, known as SPLOST, and the county's GO pledge secure the bonds.
S&P said it believed the county's guarantees for two hospital authority lines of credit are subject to immediate acceleration, and lacks sufficient cash to bridge the time it takes to repay the loan and issue the bonds.
Wall disagreed. Half of a $20.55 million line of credit is secured first by a mortgage on the hospital that must be foreclosed by the lender, leaving Water and Catoosa counties responsible for the remaining $10.27 million. The hospital was last appraised for $34 million, he said.
A second line of credit for $7.3 million matures Dec. 31. If the authority doesn't make the payment, Walker County would be responsible for $4.17 million. If that is payment is required the county would refinance its debt if necessary, Wall said.
The bonds are paid first from SPLOST revenues and there are currently funds on hand to defease the debt if necessary, he said. The county can also raise taxes because there is no cap on its tax millage rate.
"Walker County has never defaulted on anything," he said. "The municipal industry must read carefully those [GO] guidelines and make sure their client fits into the category they want or stop using S&P."
Wall said, in his opinion, that "S&P is trying to make an objective rating system" that has, as a tenet, a one-size-fits-all approach.
In affirming its Aa3 rating on March 4, Moody's acknowledged that the SPLOST bonds are first in line to be paid from the sales taxes.
Moody's also maintained a negative outlook due to the county's recent structural imbalance after multiple years of deficits reduced reserves.
Moody's rating incorporates the county's plan to raise revenues by instituting a business license tax, increasing the property tax rate, and selling its ambulance service, which has historically required support from the general fund.