Maintaining Fiscal Discipline
Upgraded County Bond Rating
An individual's credit rating or score is based upon several factors including current debt, credit payment history, time length of credit history, type of credit (mortgage, car, credit card), and frequency of applications for new credit. Scores range from a bottom of 350 indicating a high credit risk, to a top rating of 850 reflecting an extremely low credit risk. Approximately 10% of people achieve a top end score of 800 or higher. A high rating rewards you with a lower interest rate on your loans.
Much like individuals, government entities and businesses also receive credit ratings based on similar factors. And again, as with individuals, there are three major bond credit rating agencies that provide these ratings to governments: Moody's Investors Service, Fitch, and Standard and Poor's.
These rating agencies assign letter designations to indicate the degree of risk associated with businesses' or governments' credit. Moody's assigns bond credit ratings of Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C. Much like an individual's score of 850, a practically zero credit risk for a government is indicated with an Aaa rating, while a high likelihood of bankruptcy is shown with a C rating (similar to a 350 to 400 score for an individual).
In August, 2009 Moody's Investors Service, the most prominent rating agency, upgraded Hardin County Government's bond rating to Double A ("Aa") status from our previous single "A" rating thereby reflecting the county's economic stability, healthy financial operations characterized by ample reserves, and a favorable debt profile. Double A ratings are reserved for organizations determined to be a "safe investment with a low risk of failure". Less than 15% of those rated government entities receive a ranking of Double A or better (similar to an individual score of nearly 800 or better).
Moody's rating definitions indicate "obligations receiving a "Double A" rating are judged to be of high quality and are subject to very low credit risk. Issuers rated Double A demonstrates very strong creditworthiness relative to other U.S. municipal or tax-exempt issuers".
There are less than ten local governments (county and city) in the Commonwealth awarded a Double A rating; Hardin County Government is now among this list giving us the same high bond rating as the Commonwealth itself!
This Double A rating for county government's bonding is a reflection of our strong monetary reserves, low debt, and prudent management of our county's financial resources. In assigning the Double A rating, Moody's stated it "believes the county will continue prudent fiscal management practices to maintain healthy financial operations over the long term".
As stewards of your local tax dollars, we in county government are proud we've been able to manage these limited resources and simultaneously accomplish this strong financial rating while remaining among the least taxed counties in the Commonwealth. In addition to maintaining one of the State's lowest property tax rates, Hardin County Government does NOT impose many of the taxes other counties or local governments use such as an occupational tax, a library tax, an insurance premium tax, fire district taxes, a restaurant tax, or a hotel room tax.
Bonds given a Double A rating are of "high grade investment quality" and desirable by discriminating investors such as publicly traded mutual funds. Because of their extremely low risk to investors, Double A bonds incur a lower interest rate to the issuing government, thereby significantly reducing the debt payments for repaying the loan (the bonded amount).
Recently, the interest rate difference between a Double A and Single A bond can be almost one percent (nearly 100 basis points). This proved beneficial late last year when Hardin County Government refunded (re-financed) an earlier bond to reduce annual debt payments for the county's landfill. By re-financing $1.4 million of landfill debt at a lower rate over a longer period of time, county government reduced landfill long-term debt payments from $2.2 million to $1.7 million annually thereby reducing landfill annual debt expenses by approximately $500,000 or 23%.