Johnston County’s bond ratings are enjoying a slight uptick, which could mean lower borrowing costs for taxpayers.
Earlier this month, three bond-rating agencies took a new look at Johnston’s creditworthiness in advance of bond sales voters approved last November for the county’s public schools and community college. The higher the rating, the lower the interest rate and the less money a county has to spend to borrow money. The savings can reach hundreds of thousands, even millions of dollars.
When selling bonds, a county is essentially asking buyers to trust it to pay back the money with interest. The bond ratings are a way for buyers to know whether a county is trust-worthy. The rating companies look at factors such as money in reserves and economic growth. The higher the bond rating, the more trustworthy, and a county can ask for a lower interest rate.
Johnston County’s long-term goal is to reach the best rating possible: AAA. Currently, the county’s ratings are within one to two steps of reaching AAA.
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After the latest review, Standard & Poor’s gave Johnston the same rating as before: AA+. Moody’s kept its rating at Aa2 while also raising the county’s outlook from stable to positive, which doesn’t affect this year’s borrowing but could help when the county sells more bonds next year.
The N.C. Municipal Council raised Johnston’s grade from 85 to 86, which is equivalent to the ratings from S&P and Moody’s.
“Any time we can get a tick up, it’s positive, and it’s beneficial for the taxpayers,” said Jeff Carver, chairman of the Johnston County Board of Commissioners.
Carver said he is happy with the ratings. Reaching AAA is hard, he said, and will take a long time.
County Manager Rick Hester said the county started trying to reach AAA once it began selling bonds to build new schools in 1999. Back in 1997, the S&P rating was A and the Moody’s rating was A1.
Hester said the county has its bonds rating reviewed every time it gets ready to sell bonds. Last November, voters approved $57 million in borrowing for Johnston County schools and $7 million for Johnston Community College. The county will sell those bonds in 2014, 2015 and 2016.
Last week, the county received bids for the 2014 bonds: 3.24 percent from Wells Fargo was the lowest. The last time Johnston sold bonds, in 2008 and 2009, the rates were 4.03 and 3.38, respectively.
Hester said there is no direct correlation between bond rating and interest rate; other factors, such as the economy, change the interest rate too. But “there’s no question that from a big-picture perspective, the higher your bond rating, the more affordable interest rate you’ll get,” he said.
Since 1999, higher bond ratings have saved the county around $12 million in interest payments, Hester said.