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County's Debt Takes Another Hit

Moody's downgrade was tempered by a change in outlook from 'negative' to 'stable.'

A leading ratings agency cut the rating on the bulk of Montgomery County's debt on Thursday, citing the county's depleted fund reserves after "several years of sizable operating deficits."

$417 million in county bonds were downgraded from Moody's Investors Service's top rating of 'Aaa' to 'Aa1,' the next tier down on the ratings scale. The new rating will make it slightly more expensive for the county to issue additional debt.

Moody's had that its debt rating could be downgraded if negative fiscal trends continued.

The bad news for the county's creditworthiness was offset somewhat by Moody's accompanying announcement that the county's outlook was upgraded from "negative," as it was assessed last December, to "stable."

The county's bonds remain "investment grade" debt at the "Aa1" rating. Moody's includes the Aa1 designation in its "Prime-1" category, which, according to the firm, means the debt's issuer has "a superior ability to repay short-term debt obligations."

"We believe management's plans are likely to stabilize the county's financial position in the near term, albeit at a narrow level, and could augment reserves going forward," Moody's said.

County officials cited the improved outlook as evidence of their having brought sounder fiscal management to the county since taking office in January.

“Moody’s has obviously studied our actions from the day we took office,and those actions have led to the change in outlook from negative to stable," said Josh Shapiro, chairman of the county's Board of Supervisors, in a statement released to the media.

“It is clear that the downgrade is a reflection of what took place in this county’s government before January of 2012," Shapiro said.

The Moody's announcement follows in May of $18 million in bonds issued by the Montgomery County Redevelopment Authority.

Moody's echoed Fitch in its generally positive assessment of the prospects for the county's long-term financial health, citing the county's "large, diverse, and stable tax base adjacent to Philadelphia" as well as income levels that are "well above state and national medians."

That said, Moody's believes that "the county's new management team will be challenged, in the near term, to replenish financial reserves in an environment characterized by slow economic and employment growth."

Shapiro offered a more bullish take on the report.

“We are on the road to recovery,” Shapiro said. “Moody’s obviously likes the route we have taken so far, and we are committed to finishing the journey that will put Montgomery County’s finances back on solid ground.”

Bob Guzzardi July 20, 2012 at 12:05 PM
The Republicans of Montgomery County, and elsewhere, are not much more to be trusted with taxpayer money than the Democrats. At the state level, much of the downgrading has occurred because of the government (sometimes called 'public' sector) unions unaffordable pension plans granted by sell out Republican Tom Ridge in 2001 and, with a consistent bipartisanship, maintained ever since...at taxpayer expense. Something that can't continue, won't. State finances are being downgraded. Moody’s Investors Service on Monday lowered Pennsylvania’s outstanding general obligation, or GO, bonds to Aa2 from Aa1 and assigned an upcoming $363.5 million bond issuance an Aa2 rating. PaIndependent 18 July 2012 Moody’s Investors Service on Wednesday announced it has placed $942 million worth of bonds issued by Pennsylvania’s 14 state-owned universities “on review for downgrade.” PaIndependent 18 July 2012
Mike Shortall Sr July 20, 2012 at 02:31 PM
This is the REAL legacy of Joe Hoeffel and Jim Matthews and their sunshine-less little breakfast club. They tried so very hard to keep this from the public during an election year, and enabled the election of a tax-and-spend Democrat majority on the County Board. We'll be paying for this for years down the road!
Bob Guzzardi July 20, 2012 at 05:13 PM
Bipartisanship is not The Forgotten Taxpayer's Friend.
danny roturra July 20, 2012 at 09:49 PM
all of these local demigods seem to have carte blanche. since it's not their money and they don't have to make a profit their spending is unrestrained. moreover, they never go away and, in some instances, bring in their children...see the illustrious stewie greenleaf. just like any other addict, we have to cut off their supply and associated power. then and only then will they realize that they're representatives not dictators.....
Tim Rabbit July 21, 2012 at 09:42 PM
Shapiro and Richards made a "firm" commitment that they would not raise taxes if elected. http://norristown.patch.com/articles/shapiro-and-richards-no-new-taxes-if-elected This was a silly platform and they left the dirty work of raising county taxes to the outgoing team of Hoeffel and Matthews. If they want to get their triple A bond rating back, they're going to have to raise taxes next year too. Very simple.
Mike Shortall Sr July 22, 2012 at 12:45 AM
Anyone who paid attention last year knew there was something wrong financially with the County. Castor tried to warn everyone about Matthews and Hoeffel's little magic act. If they had been forced to come clean, Shapiro and Richards never would have been abe to stick to their campaign pledge leading up to the election, and they won't be able to next year either.

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