San Marcos Mercury | Local News from San Marcos and Hays County, Texas

November 25th, 2008
County bond rating upgraded to AA

By BILL PETERSON
Editor at Large

Hays County received good news from Wall Street recently. County Auditor Bill Herzog announced to the commissioners court that the bond rating agency Standard & Poor’s has upgraded the county two steps from A+ to AA.

The county’s new bond rating comes three weeks after citizens voted overwhelmingly to approve $207 million in bond issues for road construction. Up to $133.2 million is to be reimbursed by the state over a period of 20 years.

Herzog said the new bond rating will enable the county to issue the bonds without purchasing insurance. Herzog estimated that if the county were to make three issues of $60 million, the insurance would cost about $250,000 per issue, meaning the county could save close to $1 million on the entire debt issue by not purchasing insurance.

The AA bond rating give the county a “very strong” investment grade. On a scale of ten bond ratings from Standard & Poor’s, AA is the third highest.

The new bond rating from Standard & Poor’s brings the county back up to speed after a financial debacle dating back to 2003, when a private firm building a juvenile detention facility in Hays County failed. Herzog said Standard & Poor’s believed the county should be on the hook for the unpaid debt on the facility. The county argued that it was not involved in financing the project and promised only to send delinquent juveniles to the facility.

In March 2003, Standard & Poor’s downgraded Hays County to BBB-, its lowest rating, then withdrew the county’s rating altogether a year later. The agency brought Hays County’s rating back up to A+ in June 2005.

Another major bond rating agency, Moody’s, agreed with the county and did not downgrade the county’s bond rating from Aa2, which is its equivalent of Standard & Poor’s AA.

Hays County since bought the ill-fated juvenile detention facility from State Street Bank, which owned the defaulted property. In the deal, the county received an $8 million facility for $5 million and, Herzog said, the facility now pays for itself because 30-40 surrounding counties have contracted with Hays County for juvenile detention.

Herzog said the new bond rating results from the county’s strong financial condition and its ever-increasing property value, which reached $10 billion in the newest round of assessments from the Hays County Appraisal District. Herzog said the new benchmark in countywide property value forced him to purchase a new calculator because $10 billion involves more digits than his old calculator could process.

The $10 billion in property value represents a three-fold increase over ten years. In 1998, total property within the county was appraised at $3.3 billion.

The commissioners discussed how to proceed with road building at Tuesday’s meeting without setting on the first question, which involves management of the project. Precinct 2 Commissioner Jeff Barton (D-Kyle) said he would prefer one project manager to oversee all the improvements, but the court also is debating the possibility of hiring one project manager for the roads in each commissioners precinct.

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