DeKalb County’s bond rating unscathed by allegations of government corruption
By David Pendered
DeKalb County residents have received some good news from a New York bond rating agency, which looked past allegations of government corruption to see a county that is capable of repaying its debts.
Moody’s Investors Service, Inc. awarded a rating of Aa3 to DeKalb’s upcoming bond issue of $38 million. In addition, Moody’s affirmed its Aa3 rating on DeKalb’s overall general obligation debt in the amount of $354.8 million. The outlook is stable.
The Aa3 rating is the fourth highest in Moody’s rating scale. It means that analysts consider DeKalb’s debt to be high quality and very low credit risk. High credit ratings result in favorable interest rates.
This is not to say that Moody’s analysts overlooked the allegations raised by the special investigation conducted by former Georgia Attorney General Mike Bowers.
It simply means that analysts gave more weight to what they described as DeKalb’s, “substantial and diverse economic and employment base, anchored by a stabilizing institutional presence, and a manageable debt profile.”
Moody’s report, issued Oct. 16, had this to say about the results of Bowers’ investigation:
- “In early October, former Georgia Attorney General Mike Bowers released a report alleging citing widespread corruption and misconduct within the county’s leadership. At this point in the investigation, we have no indication that the alleged acts have impaired credit quality or financial stability. We will continue to monitor the outcome of any further investigations and how they may impact the county’s credit strength.”
The rating action noted DeKalb’s pattern of setting conservative revenue estimates that, when exceeded, have replenished the reserve fund. However, the fund balance has been below the formal target since fiscal 2005 because the government doesn’t follow its policies. At this point in the rating action, analysts made their one other reference to Bowers’ investigation:
- “[T]he Bowers report raises questions about high-level corruption and improper spending; however, at this time, we do not believe the findings in this report impact the county’s credit rating. We will continue to monitor additional findings, the implementation and adherence to cash and fiscal management policies, and the impacts on the county’s financial health.
Bowers was hired in March by DeKalb interim CEO Lee May. Bowers was charged with overseeing an investigation to identify public corruption in order to rout out the corruption and restore public confidence in the county’s government.
May got more than he bargained for. The report called on May to resign so that a special election could be held to elect his successor.
The first paragraph of the Bowers report states:
- “Appalling corruption and a stunning absence of leadership in the DeKalb County government are a disgrace to its citizens and an embarrassment to our state. A pattern of corrosive and widespread misconduct has destroyed public confidence in the integrity of the governing authority.”
The report also calls for a supervisor to be appointed to oversee day-to-day county operations. This is the type of government DeKalb had before the CEO model was adopted in the 1980 at the suggestion of the Carl Vinson Institute of Government at the University of Georgia.
DeKalb intends to sell bonds on Oct. 29 in the amount of $37,979,000. DeKalb plans to use the money to refund bonds sold in 2004; the debt will not extend beyond the current payoff date in 2034. DeKalb expects to get interest rates lower than it now has. The interest rates range from 3.625 percent to 5 percent on notes that mature annual through 2034, according to a bond document available from the Electronic Municipal Market Access.
DeKalb sold a total of $50 million in bonds in 2004 for the purpose of building public safety facilities, including a joint police/fire headquarters, in Tucker; a maintenance facility for public safety vehicles; a storage facility for police and fire; several fire stations and police stations as warranted by a growing population.
The bonds were sold through the DeKalb County Public Safety and Judicial Facilities Authority. The bonds were underwritten by Merrill Lynch & Co., Loop Capital Markets, LLC., and Jackson Securities, a company founded by former Atlanta Mayor Maynard Jackson.