On Monday, Fulton County District Two Commissioner Bob Ellis announced that the county’s general obligation bonds have been upgraded by the credit-rating agency Standard & Poor’s from AA to AA+. It is now as safe to invest in Fulton County as it is to invest in U.S. Treasury bonds, which were downgraded from AAA, the highest rating possible, to AA+ after congressional Republicans started playing chicken with the debt ceiling.
Investing in a municipality’s bonds is the same thing as buying its debt. You are giving the county X dollars to invest in parks, pensions, and services. In exchange, the county pays you interest and when the bond “matures” after a certain period of time, you will get your original investment back too. The higher a bond’s credit rating, the more likely it is that the county will be able to pay you back.
Fulton County received its rating upgrade because a stronger economy has led to more reliable revenue collections and the county has adopted rules protecting its fiscal solvency. Standard & Poor’s cited the county’s new fund balance policy that was introduced by Commissioner Ellis in 2015. Under this policy, the county has to maintain a rainy day fund with sufficient cash reserves to cover two months of operational costs instead of just one month.
Standard & Poor’s also said that, “Holding all other factors equal, if the county were to adopt and maintain more formalized financial policies incorporating long-range planning and reduce its debt burden, particularly for retirement benefits, we may raise the rating.”
So is a AAA rating on the horizon? Commissioner Ellis thinks that the county’s new 2016-2019 strategic plan might lead to that. Apart from ensuring that are residents safe, healthy, and prosperous, the plan aims to keep the county “fiscally sound” by measuring a variety of factors including the “percentage of vendor and grant invoices paid within 30 days, the percentage of bills/fines collected within established deadlines, and the percentage of small purchases completed within 30 days.”
Regardless of further upgrades, the county’s bonds are already in an elite group of investments. Since at least 1981, the default rate for AA+ rated municipal bonds has been zero.