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County Says Financials Strong, Despite Moody’s Threat

by Katie Pyzyk July 29, 2011 at 9:45 am 1,909 12 Comments

Arlington County could be one of the Northern Virginia localities to lose its Aaa credit rating if lawmakers on Capitol Hill don’t resolve their stalemate over raising the debt ceiling.

The announcement focuses on reviewing 177 top rated municipalities across the country, including all of Northern Virginia. Earlier this month, Moody’s placed five Aaa rated states, including Virginia, on its Creditwatch list. At blame is the above average level of reliance on federal employment and spending in our area.

Arlington responded to the announcement by saying the county’s economy remains strong. County Board Chairman Chris Zimmerman said, “Nothing has changed in terms of the County’s financial and debt management practices and fundamentals of our economic base.”

Zimmerman added that the decision by Moody’s shows how lawmakers’ inability to agree on a debt limit deal is affecting real people and endangering economic recovery.

If Arlington does get downgraded, it could be more expensive for the county to borrow money for schools, roads and other projects. But Zimmerman pointed out that Arlington’s financial reserves and additional resources would provide flexibility to respond to potential declines in revenue.

  • nauckneighbor

    Quick Reality Check:
    Ratings Agencies are just like sports commentators, they don’t really know what they’re doing and their ratings can be good or extremely off (as we just recently saw with the financial meltdown). The threat that “our credit rating might go down” and the economy will crumble is hogwash.

    • G Clifford Prout

      Excerpted from a newsletter, but I do like the cow reference from a rating agency employee.

      Later in the day at a House oversight investigation, rating
      agency officials were asked tough questions about their conduct.
      It came out that an internal exchange by S&P analysts yielded the money quote of the day – “We rate every deal. It could be structured by cows and we would rate it.”
      Being the investigative journalists that we are, we did some digging and found out that sure enough – cows were actually structuring financial instruments and loans at Wachovia. How else do losses north of $15B, or half your market value really make sense? Our cow theory also helps explain the bank’s historic 50% efficiency ratio. Not only did they hire cows, Wachovia’s management didn’t even pay them market

    • DSS10

      I hope you don’t have a “ARM” mortgage or a credit card balance or are a federal employee with you pay frozen over the next couple of years or have any income from bonds or have to finance a car in the next couple of years. The fed just announced that GDP is now at an annualized rate of 1.3% which with inflation is negative growth. It’s great for the economy to have additional pressure for higher interest rates and reduced consumption.

      As to the rating agencies, they have been really loose with their ratings over the 15 years and just now are trying to get their act together.Yes, they really know what they are doing. Who knows, maybe Arlington really doesn’t deserve a AAA rating. Maybe they will have to raise taxes to meet the higher financing costs or take money away from the schools, public works, or police.

  • BerryBerryCold

    “and fundamentals of our economic base.”

    The economic base of the County are its residents, who are heavily reliant on the Federal Government for employment (and thus, income.)

    How can Zimmerman say that with a straight face?

  • JimPB

    Members of Congress whose behavior contributes to a downgrading of the U.S. government’s credit rating are imposing a heavy financial burden on the country:
    — Interest rates on new T-bonds will be higher, increasing deficits and the debt.
    — A “job killing” increase in interest will be imposed on loans to businesses.
    — Individuals and families, many already under financial stress, will have their burden increased by higher interest rates on loans.
    — Sellers of properties will receive less as the economy slows and interest rates increase.
    — State and local governments and other government entities will have their costs of borrowed increased.

    • BerryBerryCold

      I think the issue is that borrowing to meet your obligations is not the correct way about meeting them.

      This would be equivalent to putting your mortgage (assuming one could fee free) on a credit card, and then not paying that card off at the end of the month. Would you do that?

    • Arlwhenever

      Yield (interest rate for the uniformed) on the benchmark 10-year treasury hit a 2011 low this morning (2.85%), after the House fails to act on debt limit bill last night. But keep up the fear mongering and scare tactics. Your statements will be fun to cite down the road to show how you guys are totally detached from reality.

    • Malthus

      I think there are basically 3 types involved here. There are the Jimminy Cricket Cornocopians who believe we have unlimited natural resources, unlimited capacity for population, unlimited ability to incur debt, etc and so they think this is all a bunch of hooey. The other two types are the slow crash and fast crash doomers. The new freshman class of Tea Partiers are the fast crashers who believe its better to get the crash over and done with – incurring the extreme acute pain that would entail. I think some of these also believe the fast crash is ordained in the bible (the end times). Then there are the old timers, who are looking at a slower crash with the more optimistic of these believing that with the right policies they can bring her in for a landing with unfortunate, but acceptable casualties.

      • BerryBerryCold

        When you were in High School or College and you had a large paper to write, you had 3 options.

        1) Start when you received the assignment and get it over with as quick as possible.

        2) Wait until the last minute, and complete it before the due date.

        3) Do nothing, and suffer the consequence (F.)

        Which of these was typically the least stressful?

    • ZoningVictim

      The only reason those things will happen is because of all the fear mongering over a default, which is all coming from the Obama camp. We will not have to default on our debt obligations; we will have to make immediate cuts in the ridiculous and unsustainable spending that’s been going on for the last few years. Those same ratings institutions have been making it pretty clear that they are probably going to downgrade our bond rating no matter what happens.

      Obama runs $1.2-$1.6 trillion dollar deficits three years in a row, which added almost $4 trillion to the national debt, and somehow people want to blame the Tea Party for the hit to our bond rating; strange. To put that into perspective, the largest deficit we had ever run before Obama took office was $458.5 billion, and only two years prior to his taking office have ever seen a deficit higher than $400 billion even when adjusted for inflation. We don’t have a debt crisis, we have a spending crisis; I fail to see where any of the proposed bills go far enough to fix that.

  • charlie

    glad i took advice from an internet blog and didn’t buy any of those Arlington bonds. my luxury lifestyle in 22207 would be gone.

  • Malthus

    1) Least stressful, but fighting human nature
    2) Stressful but practical solution (assuming paper can be written in the “last minute”
    3) Most fun short term


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