Upgrade pushes Wayne County, Michigan, higher into investment grade
Wayne County, Michigan, received a one-notch upgrade from Moody’s investors Service, moving it higher into investment grade four years after the county faced a financial crisis.
Moody’s upgraded the county’s issuer credit rating to Baa1 from Baa2, citing continued operational and performance improvements. The outlook is stable.
The rating agency said the upgrade reflects the county’s better positioning to absorb an economic downturn and rising costs.
“Also factored in the rating are the county's recovering tax base and economy that remains economically concentrated, and somewhat fragile in certain locations, primarily within the City of Detroit, which despite ongoing economic renewal, remains challenged by high poverty and unemployment,” Moody’s said. “The rating also incorporates still above average leverage despite restructuring with high overlapping liabilities.”
The issuer rating represents Moody's assessment of the hypothetical long-term debt of the county supported by a general obligation unlimited tax pledge, the rating agency said. The county does not currently have any outstanding debt supported by a GOULT pledge, but Moody's also upgraded $295 million of outstanding limited tax general obligation bonds and lease rental bonds issued by the Wayne County Building Authority and the Detroit-Wayne County stadium authority to the same Baa1 rating.
The bonds are secured by an unconditional lease with rental payments secured by the county's full faith and credit GOLT pledge. The pledge supporting the GOLT debt is based on Michigan's constitutional and statutory limits on tax levies available to pay debt service.
“The upgrade and positive outlook reflects the administration’s sustained commitment to a culture of fiscal stability while improving operations,” said Deputy County Executive Richard Kaufman in an e-mailed statement.
“Our finances are stable and we are better prepared to weather future economic downturns. We are focused on maintaining that progress. Doing so will help us address our remaining challenges as we continue to take steps to bolster our pension funding,” Kaufman said.
"Wayne County's recovery has created a foundation for growth, but even Wall Street recognizes that sustainable growth must be broad-based," said Wayne County Executive Warren C. Evans in a press release. "Expanding our tax base and developing a more diversified economy are important. However, it's equally critical that we address poverty and aggressively pursue policies, such as regional transit, that create opportunities for residents."
A $5.4 billion, 20-year transit plan backed by Evans’ administration failed to gain traction last year after Oakland and Macomb Counties pulled out of the regional proposal
However a transition of leadership following the death of Oakland County Executive L. Brooks Patterson in August may spark new discussion on the plan. Patterson was a Republican.
New Oakland County Executive David Coulter, a Democrat, supports mass transit and has said he believes that a transit measure could appear on a 2020 ballot.
A spokesperson with Wayne County said the county was still discussing the possibility of coming to market this year.
The county exited state oversight in 2016 and a series of upgrades restored its investment grade ratings. Moody's raised the rating to investment grade last year. S&P Global Ratings rates the county’s issuer credit at BBB-plus and Fitch Ratings rates the county’s GOs BBB-minus. It had been in junk since 2015.
The county entered the consent agreement in August 2015 as it struggled with growing red ink. 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 elimination of a structural deficit.
Since taking office in 2015, the Evans administration has eliminated a $52 million structural and an $82 million accumulated budget deficit, delivered four consecutive budget surpluses, and increased Wayne County's pension funding from 45% to 61%.