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S&P rates county bonds ‘excellent’
Sales tax volatility is a major challenge, credit rating agencies say.
YOUNGSTOWN — Mahoning County’s general obligation bonds have received a good rating from Moody’s Investors Service and an excellent rating from Standard & Poor’s this year, county commissioners learned Thursday.
In their credit reports on the county, however, both agencies that rated the bonds said sales tax volatility remains a major challenge for the county’s finances.
In its Oct. 30 report, Moody’s gave the county’s $47 million in outstanding bonds a Baa1 rating — the same as the 2007 rating.
In a report released Wednesday, the other major rating agency, Standard & Poor’s, which did not previously rate the county’s bonds, gave the county an A+ rating.
For both rating agencies, AAA is the highest credit rating.
The rating information was presented to the county commissioners by Donald L. Bank, senior vice president for investment banking at Butler Wick & Co., the county’s bond underwriter.
“That A+ rating should inspire those bond insurers because of the better credit,” Bank said. “It translates ultimately into lower costs for debt that they’re issuing now,” he said, referring to lower interest rates for the county.
Michael V. Sciortino, county auditor, agreed that better bond ratings translate into reduced insurance and interest costs.
“These are good indicators that Mahoning County will make good on its obligations,” Sciortino said. However, he said the question that should be asked is: “In this day and age, where credit is still king, how can we be better?”
Standard & Poor’s based its A+ rating on the county’s economic base anchored by Youngstown, with proximity to other employment opportunities in Akron, Canton and Pittsburgh, the county’s strong financial position and its low debt burden.
“Offsetting these strengths are just adequate economic indicators and the existence of more volatile sales tax revenues that represent approximately one half of general fund revenues,” S&P said.
Moody’s said its Baa1 rating is based on “the county’s sizable tax base characterized by a struggling manufacturing economy that has been seeing some diversification; challenged financial operations evidenced by narrowed reserves and reliant on economically sensitive sales tax revenues; and favorable debt profile.”
Both rating services noted the financial crisis the county faced due to defeat of one of its 0.5 percent sales taxes in November 2004, followed by renewal of that tax for five years in May 2005.
Moody’s noted that the other 0.5 percent sales tax was permanently renewed in May 2007 and that county officials are considering asking the voters to permanently renew the tax that passed in 2005.
“A delay in renewing the second half of the sales tax in 2010 would pose similar problems as those recently faced,” Moody’s said.
If the sales tax isn’t timely renewed, “We fall off a cliff again,” financially, Bank said.
“This is a great Christmas present,” Anthony T. Traficanti, chairman of the county commissioners, said of the bond ratings. “The Christmas present I had in ’04 is we inherited a bankrupt county,” after the sales tax failure, he added.
“I am very pleased with this rating. I think the taxpayers of Mahoning County should be very pleased, particularly now with what we see happening in the economy,” he added.
“Our debt that is issued is managed prudently in order to maintain a sound fiscal position and protect credit quality, and the best evidence of that is the history and the rating of Wall Street rating agencies,” said county Administrator George J. Tablack.