ATLANTA – Fulton County Finance Director Patrick O’Connor said the actual financial repercussions from the downgrade in the county’s credit rating by Fitch Ratings Service have been overblown.
“They call it a cut in our credit rating but it is really more of a nick,” O’Connor said. “On our long-term debt we went from AA+ to AA. We are still a super high investment grade. Our short-term debt was unchanged with all three of the rating agencies. We received the highest credit possible.”
The county is borrowing $200 million in tax anticipation notes (called TANs) to close the gap between the start of the fiscal year and when tax bills actually go out.
Still, that $200 million represents 40 percent of the total budget. And the Fulton continues to rely on cash reserves (fund balance) to cover shortfalls in the budget. In 2012, it used $30 million of fund balance to cover expenses. The current budget anticipates using $54 million of reserves to balance.
That is because the county is because the commissioners have chosen to spend down large cash reserves on hand rather than raise taxes, O’Connor said.
Meanwhile all other metro counties have raised their millage rates since the recession hit in 2008, he noted.
“Other counties raised their millage rate. But we entered the recession in a very strong cash position with a fund balance of over $150 million. The commissioners have used fund balance over and above the county’s minimum fund balance requirements,” he said.
Commission policy and good accounting practices call for a fund balance of 8.33 percent. The cash reserves used to make up the shortfall the last three years are over and above that.
O’Connor did admit that this is the last year Fulton can rely on these cash reserves. But simply means the commissioners will have to sit down and make choices. That could include a tax increase or not.
“We have faced recessions before. The county has always beaten its [spending] predictions. We always kept our fund balance. We are headed toward a wall, but in the 17 years I’ve been here they’ve always maintained that minimum reserve,” O’Connor said.
“They’re going to argue and fight. But they always end up making sure we stay within our established reserve.”
He said people forget Fulton was in a better cash position that any metro government going into the recession. Fulton’s millage rate is lower than Cobb, DeKalb or Gwinnett, O’Connor pointed out.
“We have done a better job than any of the surrounding counties in this recession and the lowest water rates in the region,” he said. “For the state Legislature to attack Fulton County [capping its millage rate] is ridiculous. This is the most fiscally sound county in the metro area.”