Wall Street Sees Ohio's Bond Rating As Stable: More 'Third Frontier' Paper Headed To Financial Markets

COLUMBUS (TDB) -- So far, the entire project has created less than 6,000 jobs in six years. There has not yet been a home run. Now the state plans to sell another $40 million worth of bonds in early August to finance Third Frontier projects that are supposed to push and shove Ohio's economy into a high-tech future. Fitch Ratings graded the bonds "AA+" today, which means they are going to market considered solid investments. And it praised Democratic Gov. Ted Strickland and the GOP-controlled legislature for steady financial management in a time when the state economy is tanking. The Third Frontier is former Gov. Bob Taft's $500 million brainchild -- since 2002 it has created about 5,600 jobs.

Meanwhile, Wall Street's take on Ohio's economy, as delivered by Fitch, is quite gloomy. It did note the state's top political leadership has so far remained "conservative in response to economic weakening" -- meaning Strickland & Co. have been penny pinching and prudent managers of Ohio's budget. Still, there are dark clouds and Ohio has not turned around:

"Ohio's economic performance remains weak, with persistent declines in manufacturing now joined by decelerating service sector employment and a continued deep housing market downturn. Since the last recession, employment growth has been limited, rising 0.5% from 2004 to 2007, compared to U.S. growth of 5.9% over the same period. Total employment in 2007 fell 0.2% year-over-year, compared to a 1.1% increase nationwide. June employment is down 0.3% year-over-year, dragged down by job losses in manufacturing and construction, while services growth remains weak. Personal income, though growing, continues to underperform comparable national figures: Personal income rose 4.7% in Ohio in 2007 vs. 6.2% nationally; first quarter 2008 personal income rose 3% vs. 4.8% nationally."

Cleveland Economic Development Fund: Bond Rating Service Raises Warning Flag

CLEVELAND (TDB) -- A soured $5.72 million economic development loan to financially troubled Myers University has prompted Fitch Ratings to issue a negative rating outlook on Cleveland-Cuyahoga County Port Authority bonds. Fitch said the possibility of a loan default involves 6.6% of an $84.1 million bond portfolio, and suggests that future efforts to promote growth in Northeast Ohio could be impacted. It also saw "economic pressures throughout the region that could negatively affect other pool borrowers." That statement amounts to a warning more bad news may be ahead. The complete text of the Fitch revision is here.

It is no secret the Cleveland area's economy is shaky -- along with much of Ohio. But the Chicago bond rating firm makes it clear that Myers problems could spill over to limit access to loans for small and mid-sized companies. Those are the kind of entities Ohio economic development officials are desperate to aid, preserve and grow if the state hopes to add and create jobs. Here's Fitch:

"Fitch's analysis reveals that the bond funds reserves would remain adequate to maintain at 'BBB+' rating regardless of any permanent losses that may be incurred by a Myers default. However, such losses would reduce the program's ability to issue additional bonds absent an increase in the fund's capital.

"The (port) authority established the bond fund in 1997 to promote economic development efforts in the region. The loan pool consists of 22 loans totaling $84.1million, with approximately 78% of loans to entities exhibiting speculative-grade credit characteristics. Combined dedicated and program reserves total approximately $23 million or 28% of total outstanding loan principal.

"The bond fund promotes economic development by loaning revenue bond proceeds to small and medium-sized industrial, commercial, nonprofit enterprises and local governments primarily in Cuyahoga County. By entering into cooperative agreements with governmental entities, the authority can also make loans for the bond fund in various counties throughout the state."

George Nemeth's Brewed Fresh Daily also has a link to the Fitch outlook revision.

Ohio Bond Rating Goof Exposed: Bowling Green Campus Moved To Toledo

TOLEDO (TDB) -- Fitch Ratings has assigned an "AA- rating" to $11.7 million in bonds Lucas County plans to sell later this month to refinance debt on a juvenile justice center. Fitch came up with the positive creditworthiness rating in part because of the county's "diversified" economy, which it reported includes 5,400 employees at Bowling Green State University. Based on that statement, investors may want to scratch their heads before buying any bonds.

Why? Because BGSU's campus is located in neighboring Wood County in the city of Bowling Green. And at last count, the state university said it had about 4,619 full and part-time employees, a number that includes 1,174 graduate assistants who are working their way through classes. That is signifcantly short of 5,400. Another seeming flaw in the bond rating report: Fitch fails to mention that the University of Toledo is in Lucas County. Maybe it has the two state schools confused -- a possibility that could suggest other data in the rating report has errors. The complete text of the Lucas County bond rating issued today in Chicago is here.

Overall, Fitch says Lucas County has "conservative budgeting practices" and a diversifying economy.

"Located in northwestern Ohio, Lucas County ranks as the sixth largest county in the state in terms of population and total personal income. The county's economy, historically dominated by manufacturing, has diversified, led by gains in the health care, business service, and engineering service industries. Large employers in Lucas County include ProMedica Health Systems, (11,265 employees), Mercy health Partners (6,723 employees), and Bowling Green State University (5,400 employees). Although diversification strengthened the local economy, national declines in manufacturing have pushed the county unemployment rate up from a low of 4.5% in 2000 to 6.3% in 2006."

Bowling Green State U.'s employee data is available here.