Citing "a sizeable decline in the county's general fund balance following several years of large operating deficits," Fitch Ratings today downgraded more than $18 million in debt issued by the Montgomery County Redevelopment Authority from its highest "AAA" rating to a rating of "AA+."
In a statement issued to the media, Josh Shapiro, chairman of the county's Board of Commissioners, called the downgrade and its associated report "disappointing because we have just begun to turn things around and dig ourselves out of the hole."
"Today’s report from Fitch and their downgrade of the Redevelopment Authority’s bond rating to 'AA+' makes clear that the irresponsible spending over the past four years severely depleted the reserve fund to an unacceptably low level and dug Montgomery County into a deep financial hole that will take time to recover from," Shapiro said in the statement.
Despite the downgrade, Fitch painted a generally rosy picture of the county's economic fundamentals, noting that the county's per capita income was almost 50 percent higher than state and national averages while its unemployment rate was below average.
"Job growth and development continues to occur around the Pennsylvania Turnpike exchanges at King of Prussia, Plymouth Meeting, Fort Washington and Willow Grove given the easy highway access to several major highway systems," Fitch Ratings said in its report.
Fitch also reported that the current county administration is "actively seeking ways to streamline government and cut expenses."
Fitch called the AA+ rating outlook "stable," meaning the rating is unlikely to change in the near future.
Along with Moody's and Standard & Poor's, Fitch Ratings is one of three nationally recognized statistical rating organizations (NRSROs) designated by the U.S. Securities and Exchange Commission (SEC) to issue credit ratings on companies, governments, and other financial entities.
The Fitch rating applies only to the roughly $18 million in debt issued by the redevelopment authority, more than $11 million of which was issued in 2007 to fund the construction of the parking garage at Main and Cherry Streets in Norristown. The county is seeking to renegotiate those bonds' terms from a variable interest rate to a fixed interest rate, which trigged the Fitch review of the county's credit.
Most of the county's roughly $400 million in debt is rated by Moody's, which said in December that the county's credit rating remained at its highest "Aaa" level but warned that it could face a downgrade if unfavorable financial trends continued.
"We will build on the progress we’ve made in our initial four months in office. Our efforts were noted positively and acknowledged by the Fitch analysts," Shapiro said.