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Fitch Affirms Arlington’s ‘AAA’ Bond Rating

by ARLnow.com May 25, 2011 at 10:52 am 2,230 53 Comments

Update at 4:25 p.m. — Correction to previous update: Arlington officials say that Standard & Poor’s has also assigned it a ‘AAA’ rating.

With the sale of more than $200 million in bonds coming up, Arlington got some good news yesterday from one of the bond rating agencies.

Fitch Ratings affirmed Arlington’s ‘AAA’ rating and said that its rating outlook is ‘stable.’

“Arlington County’s outstanding financial management, highlighted by conservative budgeting, timely tax and fee increases, and closely monitored expenditure controls, consistently produces surplus operating results leading to solid reserve levels and liquidity,” Fitch said in a statement. “The significant presence of the federal government serves to insulate the region from economic downturns and attracts high-wage employment opportunities from information technology, aerospace, defense, and consulting contractors. Economic characteristics remain exceptionally strong underscored by very low unemployment, superior wealth levels, and one of the most highly educated labor forces in the nation.”

Arlington receives new bond ratings before every bond sale — typically once per year. Officials expects to receive ratings from the two other rating agencies soon, according to county spokeswoman Diana Sun.

  • Thes

    Arlington’s “outstanding” government is again nationally recognized: ”
    –Arlington County’s outstanding financial management, highlighted by conservative budgeting, timely tax and fee increases, and closely monitored expenditure controls, consistently produces surplus operating results leading to solid reserve levels and liquidity.”

    I’ll take more of the same, please.

    • charlie

      but you still don’t support buying Arlington’s bonds, right?

      • Burger

        You would be an almost absolutely financial idiot to buy the bonds of the county you live in.

    • Suburban Not Urban

      AKA well heeled proletariet to soak for what ever they want to spend. All Fitch cares about – is can they tax enough to cover the bonds they want to sell, and is there any risk that Taxpayers will ever stand up and say no more.

    • SArl

      Who are you – an investor in the local concrete plant? We are turning into a parking lot with high rises.

  • dynaroo

    More bad news for the whiners.

    • So you think this is bad news?

      • dynaroo

        For people who like to whine about how Arlington spends too much and incurs too much debt and all that, it’s bad news.

        • As long as property values are inflated and the tax base keeps coming in they can spend spend spend. No problem.

          • dynaroo

            So property values haven’t dropped recently?

          • Stu Pendus

            Only if you’re a board member.

          • Have they?

          • dynaroo

            Are property values in Arlington inflated above their reasonable value? Are they going to come crashing down? You tell me, you brought it up.

          • I guess that is a matter of opinion. Some yes, some no. Any property is worth what someone is willing to pay for it regardless of what some arbitrary value is placed upon it for tax purposes. That said, the “value” of Arlington property is proximity to DC presumably for work, cultural, and social events (except, it appears, Rolling Thunder). The “value” of property outside of Arlington (perhaps Fairfax, Loudoun, Prince William) has more to do with other factors. I own property in Arlington and in one of these other counties. They are both valued at approximately the same, yet I get more for my money elsewhere. But, the property further out is not as close to DC. Of course, I don’t need to go into DC either. For my situation, having both is beneficial for purely personal reasons.

            That said, if someone is willing to pay $1 million for a tiny home in North Arlington then that’s what it is worth. If someone is willing to pay $400,000 for a similar home in South Arlington, then that’s what it is worth. That said, I can’t imagine paying $1 million for some of the homes I’ve seen in North Arlington regardless of the market. Will they come crashing down? Perhaps. Perhaps not. If they do, the loss potential is great. I can’t see too much of an upside on a tiny million dollar house though. Now…if I bought a decade or so ago when I could have bought it for $250,000……

          • dynaroo

            Um, okay. So maybe you should stop trying to give all the credit for Arlington’s good management to “inflated property values.”

          • Uh….no. Inflated they are compared to elsewhere in the region. That brings in more tax dollars to spend on services costing the same regionally. Simple math.

          • dynaroo

            Make up your mind and get back to me.

          • Warning! We have reached maximum density!

  • PhilL

    “The significant presence of the federal government serves to insulate the region from economic downturns and attracts high-wage employment opportunities from information technology, aerospace, defense, and consulting contractors”

    A room full of moderately trained chimps could run this County well.

    • Thes

      Let’s compare Arlington to another DC-adjacent jurisdiction with exactly the same advantages. They got a “AA+ with a negative outlook” (meaning the rating is expected to fall in the future). So. No. Outstanding financial management is also required.

      • PhilL

        Or transplant our County Board to a suburb of Detroit and see how their bond rating looks after a few years. Works both ways.

      • Arlwhenever

        Actually Thes, your link is not to PG County’s general obligation bonds, but to the bonds of a subordinate entity. Arlington has plenty of suborninate entity debt that isn’t rated AAA as well. Indeed, in recent years the vast majority of Arlington’s debt increase has been through higher cost, lower rated debt channels. One way to get high bond ratings for General Obligation bonds is to steer debt to other channels.

        • brendan

          interesting. more info?

          • Arlwhenever

            There’s a historical debt table deep in the bowels of the cut-and-paste financial report that the slothful County bureaucracy releases once a year, about six month after the year is ended and 8 or 9 months after the budget for the next year has already been adopted.

          • Jason Friess

            To clarify, the County’s outstanding debt is published at various times in different public documents such as the Proposed and Adopted Budget books (See the debt sections), the biennial Capital Improvement Programs, and as part of the Preliminary Official Statements required with every bond issuance that is undertaken by the County. This includes the County’s outstanding General Obligation debt, as well as Appropriation and Lease Backed Debt. It is correct that the only audited financials are in the Comprehensive Annual Financial Report (CAFR). That is true with all localities.

            The County does not have multiple subordinate entities from which to issue debt backed by the General Fund. There is a stand alone entity called the Arlington County Industrial Development Authority(IDA), a separate political subdivision of the Commonwealth of Virginia, from which appropriation backed debt has been issued in the past. The IDA is rated one notch below AAA, (Aa1/AA+ by Moody’s and Standard & Poor’s) due mainly to the fact that it has no taxing authority like the County does. Pricing on a Aa1/AA+ bond issuance does not significantly increase the interest costs to the County. It would not be correct to say that a majority of the County’s debt has been issued in this manner. The amount of debt issued through the IDA is also taken into consideration by the rating agencies when evaluating the overall credit worthiness of the County, and it is included in all of the County’s publicly available debt reporting mentioned above. In conjunction with evaluating the County’s outstanding debt, the rating agencies also re-affirm the ratings on IDA debt (See S&P Press release).

            Hopefully this information is helpful. Please don’t hesitate to contact me with any other comments or questions related to the County’s debt at [email protected]

          • brendan

            wow. very thorough explanation. much appreciated.

        • Thes

          Arlwhenever that is simply incorrect. It IS a general obligation bond. From my liked article: “Fitch Ratings assigns an ‘AA+’ rating to the following Maryland-National Capital Park and Planning Commission (the commission) Prince George’s County general obligation (GO) park acquisition and development bonds” (emphasis added)

          • Arlwhenever

            PG’s capital improvement and capital budget release says,

            “The FY 2011 Capital Budget consists of 144 projects totaling $375.1 million. Of that total, 53 projects totaling $76.3 million are Maryland-National Capital Parking and Planning Commission projects and are not financially supported by the County.”

            Enough said.

          • TGEoA

            Pwned

          • Arlwhenever

            PG County has actually celebrated it’s AAA ratings as well….

            http://www.washingtoninformer.com/index.php?option=com_content&view=article&id=4329:prince-georges-county-receives-triple-a-bond-rating-for-third-consecutive-year&catid=50:local&Itemid=113

            Yep, PG was able to do it, even while Jack Johnson was out there committing multiple felonies. That AAA thing, it is incredibly difficult to crack.

          • Josh S

            It’s “its.”

            Also, I would think that Mr. Friess’ posting would make it clear that two sentences, when it comes to government finances, are hardly “enough said.” The situation is always more complicated than it appears to the public.

      • PhilL

        And one other comment on your characterization of “exactly the same advantages”. Arlington benefits from being in a Dillon Rule state, whose state house is consistently more conservative than Annapolis will ever be, and of course DC…. Luckily we always have a bit of Richmond around here to help inform our local board what they can and can not do. That certainly helps.

      • brendan

        I’m kind of in the middle on this one… I don’t agree with the county on all kinds of issues, spending 600k+ per unit of affordable housing on a recent project is hardly sound fiscal policy or paying the county manager more than the Speaker of the US House and Chief Justice of the Supreme Court, but overall they chart a fairly disciplined course.

        Citing PG as an example of what can go wrong kinda works – but they’re kind of a unique case with all the corruption and long term planning failures. Plus a AA+ bond rating isn’t too bad considering how horribly run that county is.

    • dynaroo

      Fine. As long as you admit it’s being run well.

      • charlie

        what happened with Alexandria?

  • Joe

    Everyone here in 22207 knows “Fitch” in Chinese = “Mao”.

    Of COURSE they celebrate the People’s Republic of Arlington. Please.

    • dynaroo

      You’re not from this planet, are you Joe?

  • RosRes

    Oh dear. It must be so disorienting when actual facts are revealed. What will all of the poor babies who think we live in the worst county in the US complain about now? Oh that’s right, facts never got in the way before, so I guess they won’t now. Complain on dear fellows!

  • Alex

    Ratings agencies … yeah. They’re trustworthy.

    • Vinh An Nguyen

      Alex has a point. The rating agencies gave AAA to AIG and Lehman.

      • dynaroo

        That just proves ratings aren’t infallible, not that they’re unreliable. Anyone who thinks ratings are guarantees shouldn’t be buying bonds.

        • Vinh An Nguyen

          It could also prove that when you hire a ratings agency, they will give you whatever rating you’re willing to pay for.

          • dynaroo

            No, this is hardly enough evidence to prove that either. Not even close.

            There’s more evidence out there that does support your idea. But this isn’t it.

          • Vinh An Nguyen

            My “idea” is that not much store can be given to the ratings handed out by these for-profit entities. That should not be interpreted as me saying Arlington isn’t a superior credit risk.

        • Josh S

          Uhrum, but that’s what they’re advertised as. Basically.

          I think that the financial crisis revealed to us that we should take AAA ratings with a grain of salt. Apparently there is a bit of a “grade inflation” phenomenon going on with ratings. So, while we shouldn’t get too excited about a high rating, I think if we ever got a poor or mediocre rating, that would definitely be cause for alarm.

          On the other hand, there is really nothing to indicate that Arlington County wouldn’t deserve a high rating, in comparison to many other jurisdictions.

          • dynaroo

            Josh, are you claiming that ratings are advertised as infallible? I don’t think any ratings agency or any intelligent investor would say that. It’s an evaluation of risk – by definition, it acknowledges that there is risk involved.

    • Aaron

      What have rating agencies ever done wrong other than bringing the U.S./global financial system to the precipice of irreversible cataclysm a couple years ago?

      • dynaroo

        Sure, the ratings agencies did that.

    • dynaroo

      I can’t tell if you’re actually serious or being deliberately idiotic for sarcastic effect.

    • Novanglus

      It doesn’t matter if we think they’re trustworthy or if they even are. Only one thing matters: the buyers of muni bonds trust those ratings, and as a result we pay lower interest rates on our debt.

  • dynaroo

    Apparently, “bond ratings can’t be trusted” is the new “it’s only because we’re near DC” excuse.

  • R. Griffon

    Just think, in a couple of years that could be better than even the rating of the good U.S. of A!

    http://money.cnn.com/2011/04/18/news/economy/us_credit_rating_outlook_lowered/index.htm

  • C Mc D

    Fitch and other bond houses have a conflict of interest — moral hazard — in evaluating the financial propriety of municipalities they hope to sell/profit from. Fannie and Freddie and many mortgage bonds were also very highly rated… until they weren’t.

    More troubling is the attribution of Arlington’s financial genius in the face of ever increasing taxes/fees, in spite of a National recession. Give me 3-5% more every year, and I can look like a genius too. And while I respect the right that Arlington County voters to pass bond referendum, the sad fact is that somewhere above 95% of the bonds pass… no tough questions asked. Democracies aren’t usually categorized by a 95% approval of anything… but dictatorships and places like the DPRK are. I’m not suggesting Arlington is anything other than a wonderful place to live, but please approach these issues with the same cynicism that is expressed on these boards. Push for answers. Vote against constant year to year increases just because it’s the status quo. Hold your Representatives / Council to task. And appreciate that the everyone has a right (even a duty) to raise the bar and demand some accountability. $100M for new High Schools? Really? Throwing good money after bad to Metro without any hope of substantial reform? Why — what are the alternatives? Do we really want to continue to allow developers to overbuild in the Ballston corridor without any infrastructure improvements? Etc… Etc…

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