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Bourbon County Commissioner Gregg Motley said he is concerned the county’s credit rating could be downgraded after he and county financial advisor Ben Hart spoke with S&P Global Ratings about the county’s finances Tuesday afternoon.
"I would predict that we experience a rating downgrade," Motley said. "I hope I'm wrong."
S&P Global Ratings is one of the major credit rating agencies, assigning grades that tell investors how likely a borrower is to repay its debt. For local governments, that grade helps set the interest rate a county pays when it borrows money by issuing bonds.
Nothing was decided on the call, Motley said. S&P will convene a ratings review committee within a few weeks and indicate where the county's rating stands.
S&P maintains a rating of A-/stable on the county's general obligation debt, according to a July 22 letter from ratings analyst Lora Abeyta. Motley said the county's last review was in 2019.
He said the county's audits and, primarily, its reserve position drew the agency's attention and prompted this year's review.
Motley said Abeyta's supervisor joined them on the call and said little until raising concerns about the change in the county's cash reserves near the end of the meeting.
Motley said S&P has also toughened how it judges county savings. Rather than looking only at reserves as a percentage of yearly spending, he said, the agency now also wants a minimum dollar amount in the bank.
"A small county might only have $5 million total budget," Motley said. "So a percentage reserve maybe would not cover a bridge falling down, an elevator, or fill in the blank."
Motley said the county's budgetary planning was a weak point in the review.
"We don't do any long-term capital improvement planning or retirement planning," he said.
A downgrade would cost the county money. Motley said a lower rating means a higher interest rate when the county borrows, and it can also make the county's bonds harder to sell to investors.
Commissioners had taken up the S&P letter Monday night, amending their Aug. 3 agenda to hear from Ben Hart of Baker Tilly, the county's municipal advisor.
Hart told commissioners the county's chief gap is the lack of a fund balance policy, something he said could be brought back for consideration after the budget cycle.
"It's really having a savings account just like you would at home," Hart said. "If you lose a job or your wages go down, whatever, you've got something to fall back on."
The July 22 letter followed a request Abeyta sent July 14. Both asked the county to schedule a one-hour call before Aug. 10 and stated in bold that timely attention is required for S&P to maintain its rating.
Commissioner David Beerbower said he had no objection to Hart representing the county on the call, and Commission Chairman Samuel Tran said a consensus was sufficient in place of a resolution.
