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(Janesville, WI)  By Jim Leute jleute@gazettextra.com  

An upcoming bond issue to pay for several projects in Rock County will carry favorable ratings, an indication that the county has a stable, growing economy that’s highly capable of servicing its debt.

Earlier this summer, county officials presented their financial case to both Standard & Poor’s and Moody’s Investors Service, two of the top bond rating firms in the country.

Here are five things to know about the ratings:

1. The reasons for borrowing. The county plans to issue $7.3 million in general obligation promissory notes later this year to pay for capital projects, most notably for construction of Rock Haven, the county’s new 128-bed nursing home near the intersection of highways 14 and 51 on Janesville’s north side.

Any remaining bond proceeds would pay for road construction projects.

2. S&P’s rating. Standard & Poor’s rated the upcoming bond issue as “AA/stable,” which means the county has a strong capacity to meet financial commitments. The rating is two notches below the company’s top rating. S&P based its rating on what it perceives to be the county’s diversifying economic base, economic indicators that range from good to strong, a strong county government fund balance governed by good financial management and moderate debt levels. S&P noted that the county’s equalized value continues to decrease, primarily because of decreasing residential property values. However, equalized value remains strong on a per-capita basis.

“Although historically dominated by automotive and other manufacturing, the area has transitioned into a more diverse economic area,” bond raters said. “Economic development along the Interstate   90 corridor has fueled additional growth in recent history.”

3. Moody’s rating. Moody’s gave it a rating of “Aa1.” That’s one notch below the top spot. The company based its rating on the county’s sizeable and diverse tax base, county government’s healthy general fund balance and sound financial management.

As S&P noted, Moody’s also said the county faces challenges of declining value in its tax bases.

“Despite the recent declines, the county’s tax base will likely experience modest growth over the medium term due to commercial development and significant redevelopment projects underway throughout the county and within Janesville and Beloit,” Moody’s said in its rating notes.

“… Officials expect the full valuation to flatten with modest growth in the near term due to stabilization of residential property valuations and continued commercial growth.”

4. No changes in ratings. Both ratings are affirmations of those the two companies assigned to county bond issue in previous years.

5. Why matters. When the county enters the bond market to finance debt, the buyers look at the strength of the issuer. That is, a stable and growing local economy has a stronger likelihood of servicing the bond debt. Similar to a personal or business loan, the bond buyers as lenders need to be assured that their exposure is not only covered but that there’s a sufficient level of return on their investment.

A favorable bond rating means lower interest rates. Lower interest rates mean lower debt service costs for Rock County taxpayers.

“These were two very good reports,” County Administrator Craig Knutson said. “They like what we’re doing as a county from a financial standpoint, and they were also encouraged by local economic developments.”

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