New York-based Fitch Ratings has assigned an A+ rating to the Special Obligation Bonds of Montgomery County associated with the West Germantown development district refunding bonds.
The $12.5 million revenue bonds will be used to refund all of the county’s outstanding special obligation bonds, senior series 2002A, series 2004A and series 2004B, and to fund a portion of the debt service reserve account for the series 2014 bonds. The bonds sold on a negotiated basis on Wednesday, Aug. 13.
The bonds are special obligations of the county, payable solely from a senior lien on a special tax on all developed and undeveloped taxable real property within the West Germantown development district.
The West Germantown development consists of approximately 666 acres of land in the West Germantown area. The district is fully developed and consists of 1,385 taxable residential properties. Residents in the district have been paying a special tax levy in their local tax bill since 2002.
According to the Montgomery County MC311 website, “Through the creation of development districts, the county finances certain infrastructure improvements by issuing bonds secured by taxes and assessments levied on property in the district. An ad valorem based special tax is levied on all real property located in the districts and special assessments on undeveloped (not assessed at full value) residential property located in the districts to generate revenues to pay the debt service on the special obligation bonds issued with respect to each district.”
Fitch Ratings has assigned the A+ rating based on the historical strong collection of taxes and the mandatory levy required by the county and the fact that the district tax levy can be increased by 10 percent to allow for delinquencies, providing an additional cushion. The district is completely built out and no additional debt is anticipated. The value to lien ratio is high, according to Fitch.
Fitch Ratings, a ratings agency which assigns ratings such as AAA and other ratings we’ll discuss below. The objective of the rating agency is to assign a municipal bond a credit rating to make it faster for market participants to evaluate risk. The rating is essentially the county’s or in this case the special development district’s equivalent to a personal credit score. A credit rating performs the same service for institutional borrowers and investors. A bond’s credit rating is the rating agency’s opinion as to the creditworthiness of the bond’s issuer.