Is­suers May Face Bumpy Road Af­ter GM Clos­ings

The Bond Buyer - - Front Page - By Sarah Wynn

WASH­ING­TON – An­a­lysts have con­cerns about some Ohio Is­suers fol­low­ing Gen­eral Mo­tors Com­pany’s an­nounce­ment that it would close four plants in Ohio, Michi­gan and Mary­land as soon as March 2019.

GM an­nounced the clos­ings in late Novem­ber. To­gether, the plants em­ploy more than 3,800 peo­ple, with a 2017 pay­roll of $480 mil­lion.

Moody’s In­vestors Ser­vice an­a­lysts said the clo­sures may hurt the credit of some of those is­suers, but lo­cal of­fi­cials are hope­ful that eco­nomic di­ver­sity in the form of other man­u­fac­tur­ing will pre­vent more pro­nounced fis­cal dis­tress.

GM’s plant in Lord­stown, Ohio, among those due to be shut­tered, has called the vil­lage in Trumbull County (Aa3) home for over 50 years.

Moody’s said the plant clo­sure would have “a pro­nounced neg­a­tive ef­fect on Trumbull County’s econ­omy.”

“A de­cline in em­ploy­ment is par­tic­u­larly hard on Ohio cities, which pri­mar­ily rely on in­come taxes to fund op­er­a­tions,” Moody’s an­a­lysts wrote.

The Lord­stown GM plant ac­counts for about 10% of the county’s wages, said Frank Mamo, lead au­thor of the Moody’s re­port. He added the area over­all has a weak la­bor mar­ket and is still be­low pre-re­ces­sion num­bers.

“So there isn’t a lot of broad growth that is tak­ing place that will help off­set these losses from GM,” Mamo said.

The pay­roll at the Lord­stown plant was around $250 mil­lion and the me­dian mu­nic­i­pal in­come tax rate in Trumbull County is 1.5%, or $3.8 mil­lion of lo­cal in­come taxes in the county.

In­come taxes will in­evitably af­fect nearby War­ren, Ohio (Baa1), Moody’s said. War­ren Tax Ad­min­is­tra­tor Tom Gaffney is plan­ning to have $161,000 less than in 2017, but said that fig­ure was min­i­mal com­pared to the town’s $20 mil­lion bud­get.

“It’s pretty sim­ple, they’re clos­ing the plant and this is what we’re go­ing to lose,” Gaffney said.

Lord­stown Mayor Arno Hill said af­ter ceas­ing pro­duc­tion ceases at the GM plant in his vil­lage, Lord­stown will lose about $3 mil­lion in in­come taxes.

The county has the plant val­ued at $52.7 mil­lion, Trumbull County Au­di­tor Adrian Bi­viano said. In 2016, Gen­eral Mo­tors paid about $865,000 in prop­erty tax, and in 2010, they paid a lit­tle over $1 mil­lion.

Cur­rently, the City of War­ren has about $10.5 mil­lion in gen­eral obli­ga­tion lim­ited tax bonds and Trumbull County has $15.5 mil­lion in GO lim­ited tax debt. Lord­stown Lo­cal School Dis­trict (Baa1) has $1.5 mil­lion in cer­tifi­cates of par­tic­i­pa­tion and Moody’s an­a­lysts said it will be neg­a­tively af­fected since GM ac­counts for about 16% of the dis­trict’s prop­erty base.

Bi­viano said Lord­stown will soon have a new plant in town — TJX Ware­hous­ing Fa­cil­ity.

TJX Com­pa­nies Inc., which owns Home Goods Inc., TJ Maxx and oth­ers, could add 1,000 to 1,200 jobs in the county, Bi­viano said.

More com­mu­ni­ties have worked to di­ver­sify their economies for sit­u­a­tions like GM’s plant clos­ing, said Michael Bel­sky, ex­ec­u­tive di­rec­tor of the Cen­ter for Mu­nic­i­pal Fi­nance at the Univer­sity of Chicago.

“It’s not like this is the first time that this has hap­pened in the his­tory of these com­mu­ni­ties,” Bel­sky said. “I think that some of them have worked to di­ver­sify for that very rea­son and hope­fully that will lead to less of a shock.”

Hill said his vil­lage will ad­just to GM mov­ing out, but is still be­ing cau­tious. ◽

Moody’s In­vestors Ser­vice an­a­lysts said the re­cently-an­nounced clo­sures may hurt the credit of some lo­cal­i­ties.

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