Fitch Affirms Kalkaska County, Michigan's UTGO Bonds at 'A-'; Outlook Stable

2008-10-03 01:44:02 -

- In the course of routine surveillance, Fitch Ratings has affirmed the 'A-' rating for Kalkaska County's (the county) $4.8 million unlimited tax general obligation bonds (UTGOs), series 1998. The Rating Outlook is Stable.

The rating reflects the county's very low debt levels, prudent financial planning, and the substantial available balances. Offsetting credit weaknesses include ongoing subsidies of a county-owned sports facility (the Sportsplex), and to a lesser extent, increasing property tax delinquencies. In addition, the local economy faces significant challenges with some of the major sectors, including manufacturing and construction, suffering significant declines or limited growth in recent years. Voters will decide on a proposed operating millage to support the Sportsplex this November. If the millage fails, the county will explore additional steps to limit the ongoing subsidies and stabilize reserve levels, which Fitch believes is necessary in order to maintain the current rating level.

The series 1998 UTGO's are the only outstanding debt and the county has no plans for additional debt issuance. Annually, the county's treasurer issues short-term notes to purchase tax delinquencies from local taxing units. Generally, those notes are repaid within 6-7 months with tax collections.

The county maintains its financial reserves in a delinquent tax fund and various special revenue funds, including a budget stabilization fund, rather than in the general fund. The delinquent tax fund's unreserved fund balance declined to $2.4 million at fiscal 2007 year-end from approximately $3 million at the start of the decade, due to Sportsplex subsidies. On a combined basis, the unreserved general fund and special revenue fund balances represented a substantial 18.2% of total spending in fiscal 2007.

Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this underlying rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework').

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings
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