County in good financial shape

Credit ratings high

Posted 2/14/20

According to the company which evaluates the county’s financial position each year, Harnett County is sitting in pretty good shape as far as its overall finances.

In an audit report presented …

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County in good financial shape

Credit ratings high

Posted

According to the company which evaluates the county’s financial position each year, Harnett County is sitting in pretty good shape as far as its overall finances.

In an audit report presented to the board of commissioners during its annual retreat, Davenport & Associates representative Ted Cole laid out the county’s position, focusing especially on the county’s debt.

A large part of the county’s ability to issue general obligation bonds to pay for capital projects such as new schools, comes in its rating with investment companies Standard & Poors and Moody’s. Cole told commissioners the county sits very well, according to both companies.

Moody’s currently has Harnett County rated Aa2, which is the third highest rating and S&P currently rates the county AA-, which is the company’s fourth-highest rank.

He said in September both companies used several pieces of data to justify those ratings. Included among the factors for Moody’s were the size of the county’s tax base, healthy reserves and cash levels.

Moody’s also listed challenges to the county’s credit — blow average wealth levels and elevated debt compared to national averages — as well as factors which could lead to an upgrade. Among them are a decreased debt burden and significant economic expansion and diversification.

Observations reported by S&P were a weak economy, strong management, strong budgetary performance, very strong budget flexibility and very strong institutional framework.

“They’re comparing you not just against other North Carolina counties, but nationally,” he said. “Some of those you’re a little bit weaker. But you’re getting good scores on management ... good budgetary performance, good flexibility in reserves and you get a very good score just for being a North Carolina county.”

One of the key elements of the report focused on the county’s existing tax supported debt.

To simplify, it’s the amount of debt which is paid off with taxpayer dollars and generated by the issuance of general obligation bonds.

While most of the information presented in the report would likely peak the interest of financial-minded individuals, it does help to draw a small picture of where the county owes the most money and how long it will take to pay it off.

According to the report, Harnett County as of June 30, 2019, has a total tax supported debt of $157,431,600. The total can be further broken down by school, county and community college debt.

At the top of the list is school debt — which includes the two recent approved projects to build new schools in Erwin and in northwest Harnett County — and the lease on Central Carolina Community College as well as the county’s other debt.

According to the report, 64.13% of all the county’s tax-supported debt is related to schools. The county currently owes $100,963,121 compared to $38,814,799 (24.66%) for the county’s other debt and $17,653 (11.21%) for community college leases.

Those numbers do not include the interest paid on the funds which pushes the total owed to $207,192,005 or an additional $49,760,404 interest to be paid over the life of the bonds.

Between the current time and the year 2040, which is when the bonds would be fully repaid if no further debt is acquired by the county.

Payments on the debt, as it stands now according to the report, gradually declines over the course of the 20 year period. This fiscal year, the county will make a payment on principle of just over $12 million and an addition $4.5 million on the interest. The payments will drop gradually until 2040 when the final payment on the current debt will be just over $1 million on principle and just over $21,000 on interest.

While this synopsis is just a brief overview of the county’s position, Cole told the commissioners overall the county is in solid financial shape and can afford, within reason, to add more debt if needed without significantly raising taxes.

Rick Curl can be reached at rcurl@mydailyrecord.com or by telephone at 910-230-2037.

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