County gets upgrade

of its bond rating
By Scott Nicholson
nicholson@wataugademocrat.com

Watauga County’s ability to borrow money at a low rate has improved after an upgrade of its bond rating.

Moody’s Financial Services, which analyzes debt and revenues, upgraded the county from A1 to Aa3 for the county’s existing $10.1 million bond obligation.

The upgrade was made based on the county’s tax-base growth, with total county property valuation now reaching $8.4 billion.

The amount tripled over the past decade, one of the measures used by Moody’s to determine the county’s financial health and ability to repay future debts.

The new bond rating also “factors an average debt burden, with no expectation of near-term borrowing.”

County finance director Doris Isaacs said, “The most significant thing is, if we issue additional debt in the future, it helps us get a better rate.”

A property revaluation in 2007 reflected a 25 percent increase in value, and the second-home market also contributed to continued growth. Moody’s also noted that tourism and the presence of Appalachian State University, which is rated A1, help stabilize the county’s economy.

“Real estate and construction have leveled out, but we’ve not seen the decline many places have,” Isaacs said.
“ASU provides tremendous stability for us.”

According to Moody’s rating opinion, the per capita property value for county residents is $199,000.

“Income values are weaker, with median family income approximating the state and the lower per capita income of the state of 85 percent of the state reflects the impact of the student population,” the opinion said.

The county currently owes $87 million, much of it due to construction of a new high school. That leads to a direct debt burden of 1.1 percent of total valuation.

The county borrowed $70 million in certificates of participation for the project, with $25 million borrowed at 4.13 percent, in anticipation of paying off the debt from the sale of the existing high school property.

The remainder was borrowed at 3.71 percent.

Isaacs said Moody’s looks at tax base, fiscal management, revenue sources, fund balance and other factors in determining the rating.

“A lot of things have to work together to provide a good financial framework for local governments,” she said, adding that governments need flexibility to react to changing conditions.

In the opinion, Moody’s said it expects “the county’s financial position will remain strong, supported by a six-year trend of general fund balances in excess of 40 percent of revenues and a conservative fund-balance policy.”

In the last fiscal year, the county had a fund balance of $23.3 million, which was nearly 44 percent of total revenues for the year.

“Projections for 2008 (fiscal year), which ended June 30, indicate an operating surplus, despite sales tax revenues coming in under budget, given conservative budgeting of other revenues and under spending the budget,” the opinion said.

Isaacs said when she began working in the county’s finance office in 1983, the county had a financial rating of B.

“The county has certainly improved its financial position and management since then,” Isaacs said.