Citing strong finances, a stable economy and tax base, and relatively low debts, Wall Street agency Fitch Ratings has affirmed its second-highest credit rating of San Luis Obispo County as it plans to refinance some of its debt to take advantage of lower interest rates.
Fitch maintained the county’s general credit at AA-plus, considered a high grade rating in the municipal bond market, according to a report by the New York-based agency.
Credit ratings are important in the bond market and for companies and governments borrowing money because they affect interest rates. Higher ratings mean lower interest.
The agency rated the county’s $19.57 million lease revenue refunding bonds at AA. Fitch said it issued that slightly lower rating because those bonds are not secured by a dedicated revenue stream, with payments coming from the county’s general revenue.
That bond sale, set for this month, is to refinance what’s left of a $29.1 million issue of certificates of participation from 2002. That issue had in turn refinanced what remained of a 1995 of COPs, and helped pay for the new County Government Center in downtown San Luis Obispo.
COPs are a type of long-term municipal security that is often used to finance capital improvement projects or equipment. Unlike general-obligation bonds, they don’t need voter approval because they represent lease payments on government property used as collateral, and technically are not debt.
Assistant Auditor-Controller Jim Erb said in a news release that with “an excellent credit rating” and a low interest rates, “we expect to save taxpayers at least $2 million in debt service over the remaining 15 years of this issue.”
Fitch credited the county government with “consistently maintaining a solid financial position benefiting from very strong management and conservative budgeting and planning.”
It alluded favorably to the county’s efforts during the recession to eliminate multimillion-dollar budget gaps by actions such as eliminating vacant positions, using reserves, and cutting general fund support for various departments.
Fitch also affirmed high ratings for two of the county’s other long-term obligations.
It rated a total of $119.43 million of pension obligation bonds from 2003 and 2009, and $22.45 million of certificates of participation from 2002 at AA.
Fitch is one of the three major Wall Street credit rating agencies, the larger two being Standard and Poor’s Corp. and Moody’s Investors Service.