St. Mary’s government earns favorable bond rating
Agencies commend ‘very strong’ budgetary profile, leadership
Bond raters have given St. Mary’s County government a favorable review of the county’s “strong” economy and budgetary performance during fiscal year 2018, according to one bond report.
Three agencies, Moody’s Investors Service, Fitch Ratings and Standard & Poor’s Financial Services, visited the county last month to evaluate its budget, awarding the county a rating of AA+.
This year’s ratings were similar to the county’s favorable ratings in the past few years, Cudmore said, adding that the county is “following the trend [the raters] were expecting” during last year’s review.
Following a policy instituted by St. Mary’s commissioners to improve the county’s bond rating by building up reserves, county government accrued a surplus of $8.2 million, and a general fund balance of $47.4 million, or 21.2 percent of county revenue, in fiscal year 2017.
“Low debt and strong financial management has allowed us to enjoy high credit ratings,” Commissioner President Randy Guy (R) said in a statement. “Our mission will be to continue our strong fiscal management as we look toward an even brighter financial picture in the coming years.”
County officials expect fiscal year 2018 to close with about $6 million in operating surplus, which the county’s department of finance intends to add to the county’s reserves.
Increased property and income taxes, in addition to conservative budgeting, are the main reasons for the surplus, according to county officials. As is typical in Maryland counties, property taxes accounted for almost half of general fund revenue in 2017, with income tax contributing 40 percent to total revenues.
The fiscal year 2019 budget totals $230.2 million, a 4 percent increase from last year’s budget.
The county is selling $30 million in general obligation bonds to fund capital projects on Sept. 18.
The county’s tax base has grown consistently at an annual rate of almost 2 percent over the past decade due to ongoing development and property re-evaluations, and is estimated at $12.7 billion for fiscal year 2019, according to Standard & Poor’s report.
Standard & Poor’s also commended the county’s “very strong” liquidity and debt profile, with 35.5 percent total available cash comparative to government expenditures. The county currently has $7.7 million in outstanding funds for equipment leases with TD Equipment Finance Inc. and Bank of America Public Capital Corp.
The county allots funding for the state pension plan and the St. Mary’s sheriff’s office retirement plan, which was 65 percent funded in 2016. The county was liable for $23.6 million for the state pension plan in 2017, and $42.2 million for the sheriff’s office net pension liability in 2016. The county also contributes funds to post-employment benefits funds, or OPEB, and has a total of $31.9 million in unfunded liability for the program, which is 68.5 percent funded, Cudmore said.
Bond raters listed federal cuts as a potential area of concern for county finances, given Naval Air Station Patuxent River’s significant role in the local economy, although Fitch determined that “severe cuts at the federal level” are “unlikely,” and probably “would not be sufficiently severe as to alter the county’s credit fundamentals,” according to Fitch’s report.
Budget work sessions for fiscal year 2020 begin in December, when any possible changes to county taxes will be discussed.