Since becoming County Executive in 1993, I've taken great pride in my administration's many successes in achieving a progressively more efficient and simultaneously more effective Oakland County government. Now, I can hear you saying to yourself, "that's fine and dandy, Brooks, but what do you have to point to that proves it?"
Well, first there are our countless awards from state and national professional organizations recognizing us for exemplary management and accomplishments. What's more, there are these Insight articles that illustrate specific examples of our successes.
But as for the piéce de résistance, consider the following. Remember how your performance was evaluated back in school? Every semester, a report card came home with you for your parents to see. Well, for local and State governments, those school days are still with us! We're still getting report cards in the form of an annual bond rating. When Wall Street (that is, Moody's Investors Service and Standard & Poor's) evaluates Oakland County each year, they look at our:
Management and governance
Strategies and policies
Economic conditions
Revenue and expenditure composition and diversity
Financial operating performance, resources, and flexibility
Risk management and contingency planning
Investment performance
Debt burden and liquidity
Since 1998, Oakland County has received straight A's on our report cards! That is, we've been awarded a AAA bond rating by Wall Street each of the last eight years. Only 34 of the more than 3,000 counties in the U.S. have the AAA rating. Such a rating not only proclaims that we're among the best government performers, it also translates into a financial benefit.
Whenever we need to finance large scale and costly projects, such as major building construction or infrastructure improvements, we issue bonds. Those bonds are sold on Wall Street. In the case of stocks, traders establish the sale price on the trading floor. With bonds, it's the interest rate that gets established. The lower the interest rate, the less interest expense we have to pay and thus the lower the tax burden on County residents and businesses. The better our bond rating, the lower the interest rate! That's because bond buyers realize that any government with the AAA rating is a low-risk investment.
Thus far I've been talking about Oakland County as a governmental entity in its own right. Well, we've gone one step further to leverage the financial benefit of our AAA bond rating. We extend that rating to other government entities within our borders, thereby enabling them to issue bonds at lower interest rates and save on interest expense! With the difficult financial challenges many government entities now face, this is indeed welcomed by them. What's more, the County proper often benefits in other non-financial ways as well. Let's look at a few examples.
Rochester Hills Sheriff's Substation
Several years ago, a new District Courthouse was being built in the City of Rochester Hills. At the same time, the County Sheriff's Department was providing patrol services, by contract, to the City. A confluence of three needs existed:
As the City grew, so did their need for additional Sheriff's Deputies. The need had been dramatic enough that the Deputies outgrew the facility provided to them by the City. A new Sheriff's substation was thus needed.
Since officers often appear in District Court to aid with the prosecution of cases, significant travel time would be saved if the substation was in close proximity to the courthouse.
Bonding would be needed to build the substation.
The site for the courthouse had enough space to accommodate the substation, the County's AAA bond rating was superior to the City's and so was extended to them (the bonds were issued in 2002), and the Sheriff's Department reduced operating costs...an outstanding win-win by anyone's standards!
Phoenix Center
The City of Pontiac constructed a 6,000 seat amphitheater atop a three-story, 2,300 space above ground parking structure. Dubbed the Phoenix Center, the facility was in need of significant improvements at a time when the City was -- like many municipalities of late -- experiencing financial challenges. Further, the TIFA (Tax Increment Financing Authority) district that includes the Phoenix Center already had more than $8 million in outstanding bonds.
Concurrently, the County had been expanding its Homeland Security and emergency response strategic planning, and was actively pursuing the implementation of various tactical plans. As part of this effort, the need for a sizeable open space to facilitate aspects of large-scale emergency responses was identified. Such a space needed to be identified and secured as soon as possible.
A method whereby the City and the County would both benefit presented itself. A $20.5 million bond offering was arranged for facility improvements and refinancing of the TIFA debt, using the County's AAA bond rating. From the debt refinancing ($8 million), the City expects to see aggregate savings in interest expense of nearly $400,000 over the life of the issue (Based on interest rates at the time of the original analysis).
As part of the formal agreements developed to bring the endeavor to fruition, the City is solely responsible for operating and maintaining the Phoenix Center, yet grants the County access to the amphitheater and parking garage in the event of a Homeland Security or other public emergency. This will allow:
The parking structure to be used for evacuees, as a first-responder deployment site, or for emergency vehicle housing.
The amphitheater to be used as a training center, post-incident debriefing location, transfer site for evacuees, dispensing site for food and medicine, casualty triage site, or mass immunization center.
CMHA Group Homes (Pending)
One of the important responsibilities of the Community Mental Health Authority (CMHA) is to help find affordable housing for citizens with disabilities, while fostering their ability to more fully participate in our community. Recently, the Director recognized an opportunity to provide additional housing options for persons with disabilities by purchasing several group homes. These savings in lease payments and reduced property taxes will provide funding for other housing options and expanded services and support to benefit persons served by CMHA.
The rental rates currently paid by CMHA include, of course, the property taxes paid by the private-sector owners of the homes. However, if owned by the public-sector, those taxes would be eliminated, reducing rental costs for the CMHA by $40,000 to $60,000 a year! Based on a recommendation by John P. McCulloch, the Oakland County Drain Commissioner and a long-time advocate of Community Mental Health, the CMHA Director realized that he could work through the Board of Commissioners and the Building Authority to issue $3 -- 5 million of bonds using the County's AAA rating to purchase 8 – 15 group homes. The AAA rating would enable CMHA to avoid annual interest expense of $20,000 to $50,000 that it would otherwise incur!
These savings -- totaling approximately $100,000 per annum -- would be channeled back into the properties purchased and used to expand housing options and subsidies for CMHA consumers.
To date, the CMHA Board has approved proceeding with the bond issue and home purchases. The next steps will be to secure the approval of the Board of Commissioners and then to finalize an agreement with the Building Authority.
Oxford Township
Water, sewer, and drain projects are often the most costly infrastructure improvement projects that local governments undertake. To fund them, bonds are typically issued by either the CVT (city, village or township) or the Drain Commissioner. The bonds are paid back (redeemed) out of revenues from your utility bill payments. Since we received our AAA bond rating, more than 30 such bond issues have taken place, avoiding millions of dollars in interest expense over the life of the issues.
A case in point is Oxford Township. Last year it issued $10 million in Water Bonds, using our AAA rating. Over the 25-year life of the bonds, the interest expense savings will be significant.
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So, efficient and more effective government is not just a noble goal, but one that we're achieving here at Oakland County. We'll keep striving to earn straight A's from Wall Street, and extending our AAA bond rating to our local government entities. This will benefit not only our communities but -- more importantly -- our residents. Bottom line, receiving straight A's on our report cards is saving the County's taxpayers millions of dollars!
