Once junk-rated, Wayne County, Michigan, hits A1 with upgrade

Wayne County, Michigan, drew a two-notch upgrade to A1 from Moody's Investors Service as a fiscal turnaround pushes its past distress further in the rear view mirror.

Moody's raised the county's issuer rating and lease rental bonds issued for the Detroit-Wayne County Stadium to A1 from A3 this week and revised the outlook to stable from positive.

Moody's last raised the rating in July 2021 and assigned a positive outlook. The county has $892 million of debt outstanding.

Monday's upgrade is the latest in recent years rewarding the county for erasing its gaps, building up financial metrics, and tackling pension and retiree healthcare debts through a restructuring.

S&P Global Ratings lifted the rating to A with a stable outlook early in 2021 and Fitch Ratings upgraded the rating to BBB-plus and stable in 2019. The county, which includes Detroit, shed its last junk rating in 2018.

The latest upgrade "reflects the continued strengthening of operating reserves and liquidity, aided by the restructuring of retiree benefits and proactive management. Tax base growth is solid, creating some cushion against the state's strict property tax caps that can result in revenue losses during time of tax base contraction," Moody's said.

Total leverage and fixed costs remain above average but are expected to remain stable as the county's restructuring of its retiree benefits provides budgetary predictability.

"These strengths are balanced against the county's elevated exposure to automotive manufacturing, below average resident income and weak demographic trends," Moody's said.

In early 2015, Wayne County lost its investment grade status from Fitch, Moody's and S&P as it grappled with mounting deficits and pension woes. County officials warned they could run out of cash later that year.

County Executive Warren Evans said at the time a debt restructuring, state takeover and even Chapter 9 were all on the table though he believed the county could stabilize its own finances. Detroit filed Chapter 9 in 2013, exiting in late 2014.

Evans asked the state to declare a financial emergency paving the way for a consent agreement that allowed Evans and the County Commission to work with the state to renegotiate contracts, improve its cash position, and reduce underfunding in the pension system, resulting in the elimination of a structural deficit.

The county shed a $132 million accumulated budget deficit and restructured $1.5 billion in pension debts paving the way for its exit from the state pact in 2016 and began to rebuild its ratings.