DALLAS -- Wayne County, Michigan's rating is inching closer to investment grade, progress that should help with plans to borrow as much as $200 million to complete its stalled jail project in downtown Detroit.
On Thursday, Moody's Investors Service upgraded the county by one notch to Ba2, two notches away from an investment grade, and signaled more positive action could be forthcoming as it assigned a positive outlook in recognition of gains in turning around its finances.
Moody's said its upgrade reflects improvement in the county's financial position following substantial reductions in retirement liabilities and associated costs, which will add budgetary capacity to address outstanding capital facility needs. The positive outlook "reflects the potential for upward rating movement in the event the county continues to enhance its operating reserves while accommodating increased costs associated with outstanding criminal justice facility needs," analysts added.
The county, which has been working under a state consent agreement since September 2015, has eliminated a nearly $100 million accumulated deficit and a yearly structural deficit of approximately $52 million by implementing a recovery plan aimed at aligning expenditures and long-term liabilities to match revenue.
On Thursday the Wayne County commission approved a $1.5 billion 2016-17 budget on a 12-2 vote. The approved budget shows a $180 million decrease in spending from the 2014-15 fiscal year. The next fiscal year begins October 1st. It ended the last fiscal year with an accumulated unassigned surplus of $35.7 million, of which $5.7 million is available for general fund operations. It was the county's first accumulated surplus in eight years.
"Today's upgrade from Moody's speaks to the depth of our Recovery Plan and the fiscal responsibility we're instituting in every facet of County government," said Wayne County Executive Warren C. Evans. "This positions us to do more with the resources we have and continue to move in the right direction. While the news is good, there's a lot of work to do. We're committed to staying the course and taking on the challenges that remain."
The county has $510 million of long-term limited tax general obligation bonds and limited tax general obligation supported lease bonds issued by the county. It also has $287 million of short-term limited tax general obligation delinquent tax anticipation notes. Moody's rates $300 million of the county's long-term debt and does not rate the county's short-term debt.
In June, Fitch Ratings raised the county four notches to BB-plus, one notch below investment grade, from B in recognition of its progress toward structurally balancing its books.
On Wednesday the county announced that it had chosen Mannik & Smith Group, Inc. for a complete structural condition assessment of the Gratiot jail project. The county halted construction in 2013 after having spent $157 million.
The county also recently launched a request for qualifications process to pre-qualify firms with the goal of issuing a design-build request for proposals no later than January. Bids would be due about four months after the RFP is issued. The RFP and structural condition analysis are key steps in completing the jail on the existing site.
"This is another step that needed to be taken before issuing the bonds. We'd likely issue bonds shortly after a bidder is selected through the design-build RFP process," said county spokesman James Martinez.
Finishing the jail remains the most cost-effective option, said Martinez. In May, Evans said the county would be open to moving the jail to another site to make way for a soccer stadium only if it didn't increase the cost for Wayne County taxpayers and didn't delay the county's current timeline for completing the project. The county anticipates issuing $200 million in bonds but maintains financial flexibility to scale up or down if needed, Martinez said.