Romeo, MI GO Limited-Tax Bond Rating Raised To 'AA-' On Stronger Finances

NEW YORK (S&P Global Ratings) Feb. 4, 2019--S&P Global Ratings has raised to 
'AA-' from 'A+' its long-term rating on the village of Romeo, Mich.'s 
outstanding general obligation (GO) limited-tax bonds. The outlook is stable 
on all of the ratings. 

"The upgrade reflects the financial improvement the village has achieved in 
recent years, demonstrated by significantly improved reserves and balanced 
operations following years of deficits, which we expect to be sustained over 
the long term," said S&P Global Ratings credit analyst Ladunni Okolo. Romeo 
Village has generated operating surpluses in its general fund in the last two 
years following better-than-expected personal property tax reimbursement 
revenues from the state, as well as increased water and wastewater rates, 
which have eased financial pressures on the general fund from supporting its 
water and wastewater operations. Its pension and other postemployment benefit 
(OPEB) costs are high and unfunded liabilities are sizable and could pressure 
finances in the future. 

"However, the village has now built significant reserves, which hedges it in 
the near term from expenditure increases either from increased OPEB costs or a 
renewed need to support the water and wastewater operations," said Ms. Okolo. 

A pledge of the village's full-faith-and-credit, resources, and an agreement 
to levy ad valorem property taxes within statutory limitations secure these 
bonds. 

Romeo, with an estimated population of 3,642, is in Macomb County.

"The stable outlook reflects our view that Romeo will keep its budgetary 
performance at levels we consider adequate while maintaining very strong 
budgetary flexibility and liquidity," added Ms. Okolo. However, given the high 
OPEB liabilities and the general fund's recent history of supporting its water 
and wastewater operations, the village could experience budget cost pressures 
within the two-year outlook period, its currently strong budgetary flexibility 
position affords it some cushion against expenditure volatility or other 
unexpected events.