Macon-Bibb County is likely to earn a better credit rating when the governments consolidate in January 2014, a consultant told a committee of the task force working on the merger.
Consultant Walter Goldsmith and his colleagues at Davenport & Co. looked at city and county financial history, the state of the local economy and the status of similar cities, said Goldsmith, a senior vice president of the Richmond, Va.-based financial analysis firm.
At the start, they expected the consolidated government might garner a lower rating than Bibb County because of the city’s finances, he said. But that turned out not to be the case, due to the city’s “vastly improved” stability and fund balance in the past few years, Goldsmith said.
“We really concluded that the city is probably underrated,” he said.
Now they expect that the new government should pull an AA credit rating, in line with what the county has now and a step up from the city’s current valuation.
To residents of Macon and Bibb County, the credit rating could affect how much they ultimately pay in taxes. Credit ratings determine the interest rates governments can get on bond issues and loans, in turn affecting how much tax money has to be used to repay those debts.
And that’s without even considering any potential for greater efficiency when city and county budgets merge, Goldsmith said.
The city had a very good credit rating through the 1990s, but that dipped in the mid-2000s as Macon’s fund balance dropped dramatically, Goldsmith said. But under Mayor Robert Reichert, the city’s cash has bounced back, drawing better ratings in the past few years, he said. Even that is probably too low, since analysts likely were waiting to see if the trend would continue, Goldsmith said.
The county’s funds took a hit during the recession of the past few years, but they remained relatively stable, resulting in a continuously high credit rating, he said.
Macon-Bibb County’s overall financial position is “squarely in the middle” of comparable Georgia governments that have AA credit ratings, Goldsmith said.
Committee Chairman Pearlie Toliver asked if a new rating could be sought before the January 2014 merger. City and county staff can begin working on that, showing the planning that’s going into consolidation, Goldsmith said, but it probably will take several months for a full re-evaluation. After that, rating agencies are likely to look at Macon-Bibb’s finances once a year, he said.
Davenport’s recommendation to start seeking a credit re-evaluation will be sent to the full task force next week, Toliver said.
Reichert asked what up-front cost there would be in getting such a re-evaluation. Not much more than staff time, Goldsmith told him. Ratings agencies charge a fee with each government bond issue, and that covers credit reassessments.
Analysts also looked at whether the new government might save some money by refinancing the $103 million in long-term debt it will assume from city and county, but that’s not likely to happen, Goldsmith said.
“Because all of your debt has good, low rates already, there’s really not an opportunity to capture savings,” he said.
Much of that debt, however, is from bond issues to be repaid by the special purpose local option sales tax, Goldsmith noted.
Commissioner Lonzy Edwards asked if Davenport evaluated city and county pension obligations, which don’t appear on the general balance sheet. Those are increasingly important, Goldsmith said, but ratings agencies haven’t yet developed a consistent method of assessing pension obligations. Ratings agencies want information about governments’ strategies for covering pension requirements, he said.
Bids for the new government’s banking services were sought in June, and six proposals came in, said Daniel Cummings, government services specialist for the Middle Georgia Regional Commission.
After those are evaluated by city and county finance officials, a group of three finalists should be ready for recommendation in a couple of weeks, he told the committee.
Edwards noted that county officials consider firms’ lending practices to women and minorities in making such decisions.
“I have not sensed a similar concern on this task force,” he said.
City Councilman Tom Ellington said the city asks similar questions of service providers. Some banks have done “tremendous damage” to Macon and other communities through shady mortgage practices, and he doesn’t want the new government to discover it’s depositing money with a firm that has contributed to blighted housing here, he said.
Reichert said the city often has discovered that mortgage-holders were told by banks to move out of their houses, allowing them to become run down, but more than a year later the banks had not completed the paperwork to take responsibility for those properties.
Information on each bank’s local foreclosures, and whether those were completed in a timely manner, should be sought from bidders, Ellington said. He and Edwards were asked to come up with specific questions for the banking-bid finalists.
Bidders also could be asked how much they’ve reinvested in the community, Reichert said.
The Carl Vinson Institute of Government has put together several draft financial policies for the new government, said Laura Mathis, deputy director of the regional commission.
Those are being examined now, she said, and a recommendation should be ready for the task force to consider in September.