Wayne County’s ongoing budget woes and political deadlock could trigger higher borrowing costs after a New York rating service Thursday downgraded the county’s bond rating.
With a budget deficit for the last five years and with the Sheriff’s Department well over budget, Standard and Poor’s lowered the county’s rating to BBB-, the lowest investment grade rating possible. Any additional drop would put the county in junk bond status.
“Every time you drop a notch, it’s going to cost you in interest rates,” said Kevin Haney, the interim chief financial officer for the county.
The drop was expected, Haney said, and was triggered when the rating agency recently adopted new criteria. Analyst Jane Ridley said Standard and Poor’s put a cap of BBB- for bond issuers that have deficit and management issues like those plaguing Wayne County.
The county is still rated “stable,” Ridley said, indicating the agency believes there will be no change during the next two years.
But for Wayne County, it’s the third ratings cut in just over two years. It fell from A- to BBB+ in June 2011 and fell to BBB in May.
Sheriff Benny Napoleon, who is running for mayor of Detroit, has been in constant conflict with Wayne County Executive Robert Ficano, going well over budget in part because of the county jail, which is housing 2,200 daily rather than the 1,800 budgeted. Ficano has battled with Prosecutor Kym Worthy over her budget, too.
One of the biggest roadblocks has been property tax collections, which are down $105 million a year since 2008, Haney said.
“We’ve been in a cost-cutting mode for five years,” he said.