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Cornelius News

Credit worthy: Towns borrow based on credit ratings

NORTH MECK | By Dave Vieser

Oct. 13. When Huntersville Deputy Town Manager Jackie Huffman got notice of Moodys Investor Services’ Aaa Rating in September, she was understandably elated. “There’s a lot to feel great about here,” Huffman told Mayor John Aneralla as they went over details.


Just like your credit score determines how much you’ll pay to borrow for a car, municipal credit ratings measure the investment quality of issuers in the municipal and tax-exempt markets. Municipal debt is paid back over time as well, usually at lower interest rates because cities and states rarely default.

Moody’s new rating for Huntersville is just the most recent for the three North Mecklenburg towns, but while reports and dates may differ, the general message is the same: Municipal finances in Huntersville, Cornelius and Davidson are strong. That’s good news for taxpayers and businesses.

Strong financial management

In their Huntersville  report, Moody’s said the credit position for the town is excellent: “Its Aaa rating is much stronger than the median rating of Aa3 for US cities.”

Notable credit factors include a robust financial position, a very strong wealth and income profile and a considerable tax base. It also reflects an “extremely small” debt burden and a manageable pension liability.

Similar comments were found in Moody’s report for Davidson, issued on May 25, which gave Davidson an Aa1 rating.

The town benefits from a “very healthy financial position, supported by conservative management and formal policies,” according to Moody’s.

While the town’s tax base is smaller than Aa1 medians, this is somewhat mitigated by very strong income and wealth levels and economic strength given proximity to Charlotte (Aaa stable).

“The town’s long-term liabilities are modest and fixed costs are manageable,” Moody’s said.

As for Cornelius, its last credit rating was done in 2018 by Standard and Poors, another rating agency, which assigned a AAA rating to the town. Finance Director Julie Niswonger said this was the most recent credit report the town has received, pursuant to the last time they had sold bonds.

In their 2018 rating report, S&P said that the town had “Very strong management, with excellent financial policies and practices, strong budgetary performance, flexibility and liquidity.”

The benefit of a great rating

What does this all mean for residents and businesses? The ability for the town to borrow money at lower costs to taxpayers. That, in turn, means lower tax rates.

When it comes to tax rates, Cornelius is the lowest with a rate of .222 per $100 assessed value. That’s actually the lowest town tax rate in Mecklenburg County. Davidson’s rate is .29 and Huntersville stands at .24. Moreover, these rates have been stable for the past three years.

Town taxes represent about one-third of a typical homeowners or business tax bill with the remainder being primarily county taxes.

With high bond ratings and low tax rates, the three towns have been able to sell bonds and borrow funds at a lower cost.

Here’s where they currently stand on outstanding debt:

• Huntersville: $42,028,005.    

• Davidson:  $23,639,235

• Cornelius: $18,540,160      

SOURCES: Town Financial officers, Moody’s Investor Services, Standard & Poor’s