The international bond rating agency, Standard & Poor’s, recently raised its long-term rating for Yolo County’s general obligation debt from BBB+ to A- and indicated that the outlook is stable.
In its report dated Feb. 25, S&P notes that the upgrade reflects its opinion of Yolo County’s recently improved finances after the county addressed fiscal imbalances seen in past years. The rating is based on S&P’s opinion of the following factors for Yolo County:
* Adequate economy in the Sacramento area economy;
* Improving fiscal management (S&P noted that Yolo County is no longer structurally imbalanced thanks to a long-term plan that includes a target of operational balance);
* Adequate reserves at 7.5 percent of expenditures, when expenditures are adjusted for public safety fund expenditures (these reserves remain strong in 2013);
* Strong budgetary performance with the combined general and public safety funds posting the smallest deficit in three years with a basically balanced budget (S&P noted that management has implemented several cuts in the past few years, including reducing the dependence of other funds on the general fund);
* Very strong liquidity, providing very strong cash to cover debt service and expenditures and extremely strong market access; and
* Strong debt and contingent liability position with low debt ratios.
The report further noted that “the stable outlook reflects Standard & Poor’s view of the county’s improved operational results, which are due, in part, to ongoing expenditure reductions.”
S&P said it could lower the rating if the county were to return to deficit spending, or raise the rating during the two-year outlook period if the county were to maintain its structural balance.
“The disciplined approach and long-term perspective adopted by Yolo County management and staff clearly paid off and are paving the way toward a more fiscally sustainable future for Yolo County,” said Supervisor Don Saylor of Davis, chairman of the board. “In the short term, this raised rating will reduce the borrowing cost for Yolo County in the capital market.”