Commissioners believe bond rating comment worth repeating

By Jim Hardin

Herald-Banner Staff

Rockwall County commissioners heard a bond rating comment Wednesday that some felt was worth repeating.

"It's pretty significant to note that there are only 11 counties out of 254 in Texas that are rated higher than Rockwall County," Marti Shew, assistant vice president of First Southwest, said during a commissioners court work session.

Every commissioner reacted to her statement. Two wanted to hear her say it again.

"Could you repeat that three or four times?," asked County Judge Chris Florance.

She repeated it once.

"We think it's fairly significant to point out that out of the 254 counties in the State of Texas, there are only 11 counties rated higher than Rockwall County," she said.

Shew and W. Boyd London Jr., managing director of First Southwest, presented detailed information about First Southwest services in response to the commissioners’ search for a company that will provide financial advisory services, including the development of a comprehensive financial plan. First Southwest already provides financial services to the county.

Specialized Public Finance Inc. made a presentation to commissioners earlier this month.

Shew added that among the counties in the same Double-A bond rating category, Rockwall County has the smallest population and tax base, and lowest general fund revenues, but is competitive on several other key issues.

"So it kind of gives you an idea where you stand," she said. "Again, we think you should be very proud of your position.”

Continuation of tax base growth and solid management practices will position the county for beneficial rating reviews in the future, Shew said.

“Again, you are in a good spot," she added.

Shew added, however, that there’s always room for improvement.

“You’re not perfect. You’re not at the Triple-A,” she told commissioners. “There’s always room for improvement, of course. Even though your rating is great, what are some of the things that can be done in the way of future upgrades?”

She listed the following factors in future rating upgrades:

• Consistency in financial management.

• A strategic/master plan that is upgraded every five years. The plan must include public safety, roads, jails, courts and county offices, and judicial.

• Long-term capital plan keyed from the strategic/master plan, updated with the budget annually.

• Long-term operating plan keyed from the strategic/long-term capital plans, updated with the budget annually.

• General management/financial policies, preferably updated annually with the budget.

• Professional county administrator.

Rockwall County’s bond rating strengths provided by Shew are access to the Dallas-Fort Worth metropolitan statistical area, leading to strong residential and commercial growth; the county’s solid tax base; taxable value growth has remained strong as expanding commercial development continues to occur along Interstate 30 despite the slowing economy; and very strong wealth and income levels.

Other strengths listed were a sound financial position with a trend of annual surpluses; ample general fund reserves, which are increasing annually; voter support for recent road bond issue; and low direct debt burden.

Shew listed two offsetting challenges — high overall debt burden due to overlapping debt of the fast-growing school district and additional debt-financed capital needs.

Shew also provided outlook information from Standard & Poor’s and Fitch. Financial services provided by Standard & Poor’s include credit ratings. Fitch is a bond-rating agency.

Standard & Poor’s expectation is that “ … the county will maintain its strong reserves while weathering the regional economic slowdown and that property tax base expansion will continue, albeit at a slower pace, which should help the county sustain its financial position while implementing its growth-related capital program and managing its debt levels.”

Fitch noted that the key rating drivers are maintenance of strong reserve levels and continued tax base growth.

London covered details of a strategic plan, which was described as a comprehensive, integrative program planning that considers, at a minimum, the future of current decisions, overall policy, organizational development and links to operational plans.

Written material provided by London stated that in order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. The resulting document is called the strategic plan.

“We’re proud of our work that we’ve done with Rockwall County,” London said near the end of the presentation. “We’re proud of our relationship we’ve had with Rockwall County. We would like to continue that relationship with the court.”

He added, however, that he realizes a future relationship with the county will be different.

“Marti and I both sense that there will be a very different relationship going forward, that there will be more reporting in to the court, which is fine. That’s not a problem,” London said. “I’m not complaining about that. It’s just something that we’re ready to do …”

Commissioner Dennis Bailey was responsible for bringing Specialized Public Finance Inc. to a commissioners work session earlier this month.

“I was challenged with trying to go out and find someone we could work with to put together a financial plan and I think I’ve found that organization,” Bailey said during the discussion that followed the Specialized Public Finance Inc. presentation.

During the Wednesday meeting, Bailey pointed out that he worked closely with First Southwest officials in the 1980s when he served as a city council member and later mayor in Heath. He said the company “served us well.”

“Some of my customer service questions that I have are not necessarily against First Southwest and certainly not against you because I’ve had that relationship,” Bailey said. “But I’m also a firm believer I think competition makes us all better, and I think going into this process and looking at other potential vendors or whatever, I’ve gained some knowledge and I’ve also, with your presentation today, gained a tremendous amount of knowledge about your company and services that you have …”

Bailey referred to First Southwest literature that covered bond rating increases.

“That’s not totally all about ratings and all of my concerns are not totally about ratings, but these other items in here that you highlight -- like strategic master planning, long-term master plans and all those things — this is what I want to see us grow to, and move from that good to great and from this level to the next level — and we have a whole lot of more complicated issues facing us going forward in the county with a lot of other growth issues ...”

Bailey and Commissioner Jerry Wimpee then focused their comments on the need for developing detailed plans on how to deal with growth, projects and needs of the future.

Bailey later asked Florance, who is the county’s chief finance officer, to take the lead on the process commissioners should follow in dealing with financial advisor decisions.

Florance agreed to take on that job.

CORRECTION:

The Herald-Banner incorrectly quoted County Treasurer Bill Sinclair in a Jan. 22 story. Sinclair referred to a financial “policy,” not a financial “plan.”

The corrected version is as follows:

Sinclair said he believes the county needs something more than a financial policy.

“To me, what we’re looking for primarily in this activity is not a financial policy because that could be fairly simple,” Sinclair said. “What we’re looking for, in my estimation, is the planning process, looking ahead and saying here’s what the requirements or expectations are, something that documents that in light of what our policy is. The policy is not the big task.”