omeone here on the blog wasn’t happy with the fact that I didn’t have anything up here about Standard and Poor’s report. I finally found something at Thailand Press Release News I did ask the person calling themselves “curious” here on the blog to put up a link to the story for all of us. They didn’t So I did some more looking today.
Dearborn Heights, MI Outlook Revised To Positive On Likely Stronger Budgetary Flexibility
Stocks and Financial Services Press Releases Wednesday February 26, 2014 08:38
CHICAGO–26 Feb–Standard & Poor’s
CHICAGO (Standard & Poor’s) Feb. 25, 2014–Standard & Poor’s Ratings Services said that it revised its outlook on Dearborn Heights, Mich.’s previously rated general obligation (GO) bonds to positive from stable and affirmed its ‘BBB’ long-term rating and underlying rating (SPUR) on the bonds.
The city’s limited-tax GO pledge secures the bonds.
“The rating is based on our local GO criteria released Sept. 12, 2013,” said Standard & Poor’s credit analyst Katilyn Pulcher, “and reflects our view of the city’s very weak budgetary flexibility and weak management.” The city’s reserves for fiscal 2013 (June 30) were negative 8% of expenditures, or negative $2.7 million, marking the third consecutive year of a corporate (general) fund balance below negative 5% of expenditures. The city experienced operating deficits in fiscal years 2010 through 2012, due to decreased revenue, which it did not address with timely expenditure reductions. While management indicates total corporate fund reserves could possibly be in a positive position by fiscal year-end 2014, we understand the positive balance would be restricted, under the GASB54 accounting standards, which we view as unavailable. The positive balance would also likely be the result of interfund borrowing, as per current practice. Management expects to report a fund balance of approximately negative $900,000, or negative 2.3% of expenditures at fiscal year-end 2014, as well as a positive, available, operating fund balance position, without the help of interfund borrowing, by fiscal year-end 2015, which leads to our current positive outlook.
“The overall management score is weakened by turnover risk,” said Ms. Pulcher. Significant reductions in staff have led to difficulties managing the city’s finances and accounting for them, and management is concerned further reductions may be coming due to several staff members nearing retirement age.
The rating also reflects our assessment of the following factors we consider weakness, which include the city’s:
Very weak economy, reflecting high unemployment and population decline in Wayne County; and
Weak management, reflecting significant staff turnover in recent years and expected in the next few years.
Also reflected in the rating are the following factors we consider strengths, which include the city’s:
Very strong liquidity, providing very strong cash levels to cover both debt service and expenditures;
Very strong debt and contingent liabilities position, reflecting rapid amortization and a low debt burden, measured as a percent of market value; and
Strong budgetary performance, with surpluses in both the corporate fund and total governmental funds in fiscal 2013.
“The positive outlook reflects our view that Dearborn Heights’ budgetary flexibility may strengthen over a two-year horizon,” said Ms. Pulcher, “and we believe the city’s improved operational position is likely to translate into stronger available reserves.” Should available fund balances strengthen above 1% of expenditures, we could consider raising the rating. The rating is unlikely to improve if budgetary performance is worse than expected and reserves remain flat, in which case we are likely to revise the outlook to stable.
Here’s what curious posted on 3-13-2014
I find it interesting that this blog highlighted the fact that Standard and Poors rated Dearborn Heights as stable last year and made a big deal out of it which it was. However, DH has improved to positive. That is good news. Where is it posted here?
Curious then posted on 3-15-14
Still no posting of the Standard and Poors upgarde! Very intersting. But lets all bash snow plowing.
My respones on 3-15-14 @12:34am
If you have that report or link please post it I can’t find it sorry I’ll be more than happy to post it.
As of 3-15-14 @ 10:12am nothing from Curious instead of trying to make it look like I wouldn’t put up anything positive about Dearborn Heights…next time “curious” please post a link or something to the story. I’m more than happy to let the taxpayers know that the extra money they gave to the administration is doing good. This rating has an effect on all of us it’s not just about giving the Mayor a “pat on the back” telling him job well done or not as the situation warrants it’s about the City’s well-being as a whole.
You may feel that “streets” aren’t part of a City’s well-being, but look at it from a potential home buyers perspective. If I’m coming to the City looking at homes and see un-plowed streets, streets full of deep ice bumps, and pot holes that could cause a tire to come off. I’m asking my self do I want to live here? Do I really want to invest in a City that doesn’t take care of its streets/residents? People buying homes here gives the City money (tax revenue.) That money as I’m sure you’re aware pays for the up-keep of those very streets I’m taking about. So yes curious it makes a difference. Just like how the “rat” problem hasn’t been handled, or the “dog” problem hasn’t been handled, or the many other things that could make a good image for our City haven’t been handled. It all makes a difference. We are all investors in Dearborn Heights…we became investors when we bought our homes here.