Agenda - Council - 08/24/1982 - Laserfiche WebLink

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I i I I i I I I I i ! I I I I I I Updated accounting and financial reporting systems are an integral part of management that is ready to meet the challenges of hard decision-making. Only with this current and reliable data can you as financial managers provide the executive and legislative leadership with the bases upon which to make intelligent decisions. It is therefore not the bond rater alone who is looking for evidence of modern management tools. You, as daily practitioners ought to be demanding it. We are often asked whether an issuer can improve its present bond rating. We respond by indicating that management ought to focus on those elements that are mostly within %heir direct control. For example, manaoement cannot change %he location of %he unit.~ Often, location itself is an important factor in the economy'. Discretionary elements would include improved planning and budgeting so that financial results will reflect such policy guidelines. We prefer an avoidance of reliance upon short-term debt instruments. We prefer to see a b~]anced debt policy so that bonds are issued to pay for capital projects when all project costs are in. Al%bough the local economic base is usually not under the direct control of management, mun~c~ps]_ities can, by adopting an orderly climate in planning, zoning and ]and use encourage a balanced economic environment which is most conducive to achieving a positive feeling for investment w~thin the community. Sometimes, a current rating wilt be difficult to improve due to serious economic base dislocations Which are not indicated to be subject to likely improvement. On the other hand, in more cases than not, management does have within its grasp,-the ability to enhance ~he credit quality of a bond issue. In ]ate 1980, Standard & Poor's Corporation adjusted Baltimore County's general obligation bonds to 'AA+' from 'AA' and the same rating was recently confirmed. I have reproduced some material from our files on the county indicating the basis for our rating rationale. You will note that we emphasized the economic base as well as financial management as key factors in'the rating. As far as a rating presentation, Baltimore County again showed its sophistication by including representatives from the executive, legislative and economic development sectors in its recent delegation to visit S&P. In most cases then, %here is a good chance to improve your bond rating by really working at it; keeping the rating agency informed with reliable, complete and timely data which will go a long way to build credibility--so important in the bond rating process.