Standard & Poor’s rates Island County, Oak Harbor
By JESSIE STENSLAND
Whidbey News Times Assistant editor
August 30, 2011 · Updated 3:47 PM
While Standard & Poor’s got a lot of guff for downgrading the U.S. credit rating, Island County officials are happy with the ratings agency’s evaluation of local debt.
Last year, in the midst of historic budget problems, Island County officials contracted with Standard & Poor’s to rate the county. Budget Director Elaine Marlow explained that the county issued refunded bonds, which essentially means existing bonds were refinanced to take advantage of lower interest rates.
The rating agency assigned the AA rating to the county. That was an improvement from 2001, when Moody’s rated the county at AA-minus.
Marlow explained that the commissioners’ budget cutting had a lot to do with the improved rating.
“Standard & Poor’s was extremely impressed by the swift action the commissioners took to reduce the budget when the revenues were dropping,” she said.
In addition, the rating agency credited the county’s good financial policies and practices, the low debt burden, the record of maintaining strong available balances and the stable residential economic base as reasons for the good rating.
Marlow said the county paid Standard & Poor’s $4,250 for the rating, but the refunded bonds saved the county $349,000 over the life of the bonds.
In comparison, the city of Oak Harbor received the AA-minus rating from Standard & Poor’s this March. The city issued bonds for a marina improvement project.
Finance Director Doug Merriman said he was pleased with the rating. He said any rating in the “AA category” is categorized as “high quality” and signals that the city is in a very good financial situation.
Merriman pointed out that the agency acknowledged the city’s strong financial management and oversight, including a policy of keeping reserves at a minimum of 15 percent of the general fund and 25 percent of enterprise funds.
Standard & Poor’s report on the city also found that the city has a “very strong financial position,” a strong market value of an estimated $73,600 per capita this year, and a stable economy with the Navy base serving as “a major factor in that strength.”
The rating agency, however, found that recent declines in the city’s assessed value offset, in part, these strengths.
Merriman said that high ratings equate to lower interest rates, at least theoretically.
The city paid $5,950 for the rating. Merriman said it was higher than normal because the city officials had the marina bonds rated two times, once as revenue bonds and again as limited tax general obligation bonds. He said they wanted to see if there was an advantage under either scenario.
Merriman said the weighted average for the marina bonds was 3.94 percent, which he said was “pretty good.”
Contact Whidbey News Times Assistant editor Jessie Stensland at email@example.com or 360.675.6611 ext. 5056.