MOUNT VERNON — Although the city did not receive the A1 bond rating it recently hoped for, City Auditor Terry Scott said it did not diminish the city's financial stability.
“We thought we warranted an A1 rate,” said Scott. “I think our numbers and demographics were remarkable.”
The city has a rating of A2. Scott recently traveled to New York City, seeking the higher rating of A1 from Moody’s rating agency.
“We went before the same analyst as in 2007, and I knew what their concerns were,” said Scott. “They are not necessarily things we had control over; they are the demographics of our community.”
Scott said one of the indicators noted in 2007 was how the income tax revenue was generated.
“One of the major concerns in 2007 was that the top 10 major employers were contributing a significant amount of our local income tax, so what we did was be more precise,” he said.
In 2001, 43.27 percent of income tax revenue was generated by the top 10 employers. In 2008, that number declined to 16.35 percent.
“Now we are getting a significant amount of tax revenue from smaller businesses and individuals,” said Scott. “So we had a big change in those numbers, as well as a change in the number of tax filers.”
Scott said that in 2004, 12,101 returns were filed. In 2007, 12,934 were filed.
The returns in 2004 included 23,618 personal exemptions; in 2005, that number climbed to 25,267. Scott said the increase in personal exemptions could indicate more children; more children, he said, promote the school system.
In 2004, the total federal adjusted gross income for Knox County returns was $480,270,532. The number for 2007 increased to $710,182.843. In a state ranking of school districts, which is based on the AGI, the county rose from 308 out of 600-plus school districts to 121.
“So our wealth in education has come up considerable,” said Scott. “That again is an indicator of the wealth in the county.”
These numbers, said Scott, indicate stability. More people are filing returns, which can mean more people are coming to the county, or more workers are staying in the county. A strong school system can likewise draw or retain people in the community.
“[Moody’s] wants to know what is going on in the community,” said Scott. “The analyst thought our presentation was probably one of the best she ever heard. Unfortunately, the panel did not see it likewise.
“Moody’s tends to put everyone together,” he continued. “I knew going in that Moody’s was not favorable to Ohio. I told them, ‘We are in Ohio, but we are not Ohio.’ They did not take us on our own merits.”
Scott sought the higher rating because the city wanted to refinance bonds issued for the water treatment plant, and issue new bonds for the Black Jack Road improvement project and the Kokosing and Center Run interceptor projects. The bonds are called general obligation bonds, which Scott said are backed by the full faith of the city's general fund. The city received rates of 3.52 percent and 3.93 percent, respectively. Although it is difficult to be precise, Scott said, that compares to a rate of up to 5 percent if the city had a lower rating than its current A2.
“The name Mount Vernon is very well known and well recognized throughout the United States in the bond world; we’re not out there all of the time,” said Scott. “Most of those who buy our bonds are located throughout the U.S.”
Scott said the city files annual reports to Moody’s. If the demographic and financial numbers decline, Moody’s has the option to downgrade the city’s rating. On the other hand, if city officials feel the numbers have improved, a higher rating can be sought at any time. He said that the next time the city issues bonds, it will probably switch rating agencies, of which there are three. In addition to Moody’s, Standard & Poor and Fitch rate municipalities.
“Standard & Poor does have a good history of looking at [the city] individually,” said Scott. “If and when we got to the market again, we’ll probably switch.
“We’re not planning on going any time soon,” he added. “We’re not planning on doing any refinancing any time soon because of the good rates we have now.”
Scott said there were probably only a dozen cities which have the A1 rating.