King George supervisors get report on county’s financial health
King George supervisors got several pats on the back this week from their financial adviser—and each other—during a lengthy presentation that praised the county’s policies, credit ratings and even its debt level, which has grown 404 percent in the past decade.
Davenport & Co., which has headquarters in Richmond, has been King George’s financial adviser for more than a decade. Its representatives routinely appear before the board to discuss refinancing, changes in the county’s credit rating or the opportunity to borrow money at low-interest rates.
But Tuesday night’s presentation—given at the last meeting before Election Day—almost sounded like a campaign advertisement.
“Because you’ve been doing the things you’re supposed to do, investors believe in King George as a strong credit [risk], and as such, [recognize] the county as a desirable investment opportunity,” said David Rose, senior vice president with Davenport.
He also pointed out that Fitch Ratings upgraded King George’s outlook from stable to positive eight months ago.
“In this environment, that speaks volumes,” Rose said.
Supervisor Cedell Brooks Jr., one of two board members facing re-election on Nov. 5, responded to Davenport’s praise.
“In other words, we’re in pretty good shape,” Brooks said. “We’ve used some sound judgment as we’ve gone along.”
Brooks faces opposition from Shawn Lawrence in Shiloh District. Supervisor John LoBuglio has three opponents: Jeff Bueche and Rich Lorey, who have criticized the county for its debt, and Jim Howard, who held the James Monroe seat before LoBuglio was elected four years ago.
Rose told the supervisors that his company meets with county staff every fall as King George begins its annual budget planning process.
But the financial adviser has not reviewed county finances in such detail at any other autumn gathering in the past five years.
Rose pointed out that the county’s credit rating has improved three times since 2004—which Board of Supervisors Chairman Dale Sisson Jr. noted was the year he took office.
Of the 95 counties in Virginia, fewer than 10 have higher ratings, Rose said, and each has a significantly larger population than King George.
As for the county’s debt, it has increased from $14 million in 2003 to $70 million in 2012. Rose painted that in a favorable light, too, saying the Fitch Ratings reported that “long-term obligations do not pressure the credit.”
“Yes, debt has gone up,” Rose said, “but so have other things in a positive way, such as the county’s tax base.”
Rose also pointed out the county has established a capital fund to pay down its debt. Money in that fund comes from landfill operations, as the county gets $5 for each ton of trash dumped in King George.
In 2012, landfill operations produced almost $6.8 million for the capital fund. That fiscal year, payments on the debt service totaled $6.6 million.
King George is “unlike virtually all other Virginia localities” in regard to this capital fund, Rose said.
The county also has saved more than $6 million by refinancing debt. And, it has completed $103.5 million in capital improvement projects, including the government complex, library addition, new high school and elementary school and upgrades to several water and sewer systems.
Supervisor Joe Grzeika recalled when he joined the board 18 years ago—and Brooks was already a member. The county had trouble meeting its payroll.
“In 20 years, you’ve seen the county turn around, and that wasn’t by accident,” Grzeika said. “The strategy and foresight of people who sat on this board for the last two decades is pretty profound.”
Sisson said the board gets “beaten up” at budget time because it keeps $23 million in reserves, as specified in its financial policies. Residents wonder why the county can’t dip into reserves to fully fund requests from schools or fire and rescue.
Sisson said it’s hard for people who don’t have a lot of “experience with finances of this perspective” to understand the practice. He compares it to taking money out of savings to pay for groceries.
Supervisor Ruby Brabo told the consultant that, as a customer of the King George Service Authority, she does not agree with Davenport’s plan to have the customers absorb the authority’s $25 million worth of debt.
The county used to pay part of the authority’s debt, but is following Davenport’s advice to have the customers who use the service pay for the debt.
She said the authority benefits the entire county, in terms of economic development and the rating the county gets for fire coverage, which depends on the amount of water storage.
Cathy Dyson: 540/374-5425