Recent lessons from towns devastated by hurricanes and tornadoes have prompted Beaufort County to sock away money so it would not have to rebuild its bond rating while it rebuilt the community. Beaufort County Council will consider a policy on Monday to keep enough money in reserve to make all of its debt payments for a year. That means it would not risk default should a natural disaster strike. The reserve also would enhance the county's credit rating.
"If we owe a dollar in (bond debts) one particular year, we need to set the tax rate to pay for that dollar," county chief financial officer David Starkey said. Property and personal taxes would be set to pay next the years' debt, he added.
The county makes fixed interest payment on its bonds in August and September, and then pays principal payments in March and February. As it stands, if a hurricane struck, county reserves likely would be depleted after the due date of interest rates alone, Starkey said.
"We've seen from disasters like Hurricane Katrina that New Orleans was not as prepared as they are now," he said. "When you see those natural disasters occur and there's not a lot of preparation behind them, it becomes a problem."
While FEMA provides aid to help governments pay operating costs, that funding can't be used to pay bond debts, Starkey said.
County Administrator Gary Kubic said interest rates on bonds have been low during the economic downturn and that the policy could be adopted without council increasing property taxes.
Starkey said there is currently about $20.7 million in the reserve fund. However, only $2.8 million of it is uncommitted. He said it could take between five and 10 years to save enough to cover the county for one year. The time frame varies depending on interest rates in the bond market and how much the county borrows, he said.
Starkey also said the policy could also help the county achieve the highest Standard & Poor's and Moody's credit ratings. Right now, the county has the second-best rating -- AA+ and AA1 respectively -- from the agencies.
"Our bond rating has a direct correlation to how cheaply we can borrow money," Starkey said.
The county Finance Committee recommended council approve the proposal at its meeting Monday.