Posted: 7:00 a.m. Thursday, June 12, 2014

Butler County debt continues to drop

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By Denise G. Callahan

Staff Writer

BUTLER COUNTY —

Butler County has shaved more than $35 million off its debt load during the past five years, and the commissioners plan to refinance four bonds that will save $3 million in interest payments this summer.

Back in 2009, the county was mired in $94 million worth of outstanding debt. Today, that figure stands at $58.9 million.

The commissioners have agreed to pay off an additional $321,000 this summer for one of the county’s outstanding notes for fiber optics and to refinance four bonds that will result in a $3 million savings.

“We’re paying a lot of principle off,” said County Administrator Charlie Young. “Paying off this additional note is part of our process to reduce our debt. We have a very aggressive schedule, and we’re trying to be even more aggressive.”

Moody’s, a credit-rating agency, recently downgraded the county from Aa1, the second-highest rating on the agency’s 21-level scale, to Aa2. The downgrade was based on several factors, including new standards set by Moody’s. The credit-rating agency’s report listed three challenges for Butler County: its reliance on economically sensitive sales tax and investment income; “narrow ” reserves compared to other entities; and exposure to the under-funded Ohio Public Employees Retirement System (OPERS).

Commissioner Don Dixon said the county has about $17 million in reserves, but he believes they will need to have about $30 million in the bank to get their bond rating back up and that could take four or five years. The county depends on a healthy bond rating to get favorable interest rates.

Andy Brossart, the county’s financial advisor, said paying down the debt will be important to Moody’s. On the refinance plan, the reduced interest rates will mean a $3 million savings. He is estimating the county will be able to get interest rates in the 2.22 to 2.5 percent range for the four bonds the county plans to refinance this summer.

“In today’s market, we have the ability to cut those interest rates in half for the county,” he said.

Dixon said for many years the county was only paying interest on notes, until the state auditor stepped in and said the county needed to start paying off principle. Some of the large chunks that have come off the debt load were not paid by choice.

“A lot of that debt was already amortized, which means there was no choice, it had to be paid first,” he said. “It wasn’t a voluntary thing, you couldn’t not pay it.”

The three commissioners said paying down the debt and banking reserves are important, and it is a “fragile formula” to figure out which should be the priority at any given time. The debt repayment schedule shows the debt should be cut in half by 2019 and completely erased in 2030. The county plans to pay off $7.5 million this year.

“I think that, right now, the higher priority is to accumulate those cash reserves and still pay down debt quicker than the schedule,” Commissioner Cindy Carpenter said. “And we have been doing that. We haven’t just been making minimum payments on the notes.”

Commissioner T.C. Rogers said he hopes to add another $3 million to the cash reserves this year. The county pulled in $4 million more in revenue than was projected last year and revenues are trending higher than anticipated this year as well. Rogers said the county has a long range plan, and they will reach it.

“There was a lot of debt accumulated in years past,” he said. “You can’t fix it overnight, it’s got to be proportional, but I think we’ve made tremendous strides.”


BUTLER COUNTY DEBT LOAD

2009: $94 million

2010: $87.6 million

2011: $81 million

2012: $73.4 million

2013: $66 million

2014: $58.9 million

Source: Butler County

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