In recent years, the County notes have been sold as variable rate notes and paid monthly as to principal and interest. For example, on May 25, 2006, the County issued its General Obligation Limited Tax Notes, Series 2006 in the aggregate principal amount of $35,000,000. The proceeds of the notes were used to pay local taxing units 100 percent of their delinquent 2005 property taxes.  From the collection of the delinquent 2005 real property taxes, the County makes payments of principal and interest on the Notes monthly.

Ratings on the Notes are applied for annually from Moody’s Investors Service, Inc., and Standard & Poor’s Ratings Services. Standard & Poor’s designated the Series 2006 Notes at SP-1+, and Moody’s assigned a MIG 1—both are considered the highest ratings for notes. In 2006, no application was made to any other credit rating agency for Genesee County’s tax notes. Any explanation of the significance of these ratings may be obtained only from the respective rating agency. Additionally, definitions of the ratings can be obtained by contacting Moody’s Investors Service http://www.moodys.com/ and Standard & Poor’s Ratings Services.

The cash flow benefit to local taxing units can best be understood by examining the real property tax levy and collection process without a delinquent tax revolving fund. Local taxing units levy property taxes annually to fund their current operations and to pay debt service on borrowings. Local taxing units levy these taxes at various times of the year, although the last levy typically is not later than December 1. The local taxing units continue to collect these taxes until the March 1 following the year in which the taxes were levied. On that March 1, the responsibility for the collection of the taxes that are unpaid and delinquent rests with the County Treasurer. At that point, a lengthy process begins during which the delinquent property taxes and interest and penalties thereon may be paid to the County Treasurer. As the County Treasurer subsequently receives the delinquent tax payments over the next few years, it periodically distributes to the local taxing units their share of these payments. Of course, receiving property tax revenues years after the year in which they were budgeted to be received poses significant cash flow problems for the local taxing units.

The procedure described in the preceding paragraph was in effect prior to 1968. In 1968, the State of Michigan enacted a law to permit counties to create a delinquent tax revolving fund. The purpose of the delinquent tax revolving fund was to pay to all of the taxing units within the County from such fund all of their delinquent taxes on the day that they turned over the delinquent tax rolls to the County Treasurer for collection. At that time, the only way for a county to obtain money for the delinquent tax revolving fund was to use its own general fund moneys, which is something that most counties were unable or unwilling to do. In 1972, however, another state law was enacted that permitted counties to borrow money by issuing their short term notes in order to obtain moneys to fund their delinquent tax revolving funds and thus pay local taxing units 100 percent of their delinquent taxes. Genesee County first issued such notes in 1973 and since then has issued notes annually for such purpose.

Typically, the County notes are issued in the spring, after the amount of delinquent taxes of each taxing unit for the prior year has been determined. The proceeds from the sale of the notes are then distributed to each of the taxing units in an amount equal to that taxing unit's delinquent taxes. As the County Treasurer subsequently collects the delinquent taxes, such moneys are then used to pay the debt service on the County notes. In this way, the taxing units are able to receive all of their property tax revenues in the fiscal year for which the taxes are levied.