The DeKalb County government has a credit problem.
Standard & Poor’s (S&P) Ratings Services announced on March 28 that it had lowered the county’s general obligation debt from AA- to BBB and its long-term rating on the county’s appropriation-backed debt from A+ to BBB-.
The rating on DeKalb’s outstanding water and sewer bonds was dropped from AA+ to AA-.
After the ratings were lowered, they were withdrawn by S&P, a financial services company that publishes financial research and analysis on stocks and bonds.
Commissioner Jeff Rader said the immediate impact of the ratings on the operation of the county government will be marginal. However, the impact of the downgrading of the water and sewer debt could be “very detrimental” to the county as it seeks to raise money for the water and sewer improvements, according to Rader.
In December, the county’s Board of Commissioners approved $1.345 billion in improvements to DeKalb’s water and sewer system, which will be financed by an 11-percent rate hike each year for three years beginning in 2012.
“We need to correct it [the rating] in order to be able to use that money more cost effectively,” Rader said. “We’ve been eroding our financial position and making ourselves vulnerable to these bond downgrades.”
To address the problem, Rader is planning to introduce legislation to amend the 2011 budget to raise taxes, not for additional services, but for the budget reserves. The current budget has $12 million for reserves, but the county needs $45 million—enough to keep the county running for a month.
Rader is proposing a 3.3-mill increase, which would bring in approximately $51 million in tax revenue. That would add $33 million to the county’s budget reserves and raise an extra $17.7 million that could be used to adjust other tax funds departmental budgets.
“That’s going to be a tough thing for some people in the public to swallow,” Rader said. “What it says is ‘we’re going to raise your taxes and we’re not going to give you anything else in addition for that.’”
Rader said he does not know if the proposed tax increase would have enough votes to pass.
“I’m not a big fan of tax increases but at this point I think we’ve really got to do something to restore the fundamental confidence of the financial market,” Rader said.
In downgrading the county’s credit rating, S&P cited the county’s Board of Commission’s rejection of the proposed 2011 budget of Chief Executive Officer Burrell Ellis, which called for a 12-percent property tax increase.
“I presented a lean and responsible budget proposal to the Board of Commissioners and they have been playing politics with it ever since,” Ellis said in a statement. “Their actions are costing DeKalb taxpayers more in the long run, and this is another example of that.”
Rader said it is no secret that the commission and the administration have been at odds over the budget.
“The debate over the budget is a healthy thing for us, because… we really do have to learn how to live within more limited means now,” Rader said. “We can’t expect our tax digest to expand every year.”
Rader said the administration has responded to the commission’s unwillingness to approve budget increases by cutting more than $100 million from the budget over the past few years.
In the current budget, the board of commissioners mandated 8.9 percent in cuts from most departmental budgets. The budget of the fire and rescue department was cut by 29.41 percent, while the sheriff’s office and police department were cut by 4.46 percent. The human resource department’s budget was cut by 25 percent.
To adhere to the budget, county departments have been implementing various plans including: laying off 82 fire recruits; postponing training for 40 police recruits; eliminating police crime scene investigators for non-violent crimes; restricting the use of the police helicopter; reducing library services; and cutting hours for the tax commissioner’s office. Several other departments are considering furloughs, layoffs and a reduction of hours.