Arlington County Credit Rating Reaffirmed

by ARLnow.com August 5, 2011 at 1:44 pm 2,942 32 Comments

Arlington County’s top Aaa credit rating has been reaffirmed by Moody’s Investor Service, but with a “negative outlook” assigned.

The rating agency had threatened to downgrade Arlington during the U.S. debt crisis, due to its indirect ties to the federal government. With the debt crisis resolved and with the federal government’s Aaa rating reaffirmed, Moody’s reaffirmed the ratings of more than 300 public finance issuers, including Arlington.

In a statement, Moody’s said that Arlington and other debt issuers would, like the federal government, be assigned a “negative outlook.” The agency said that the outlooks “will be reviewed on a case by case basis in the coming weeks,” in order to determine whether individual outlooks should be set back at “stable.”

“In order to have a stable outlook, an issuer will need to have credit quality that could be expected to remain higher than that of the U.S. government in the event that the sovereign were downgraded from Aaa,” Moody’s said.

The county’s debt rating affects the interest rate at which it is able to borrow money through bond issues.

  • Thes

    You can be sure that even if Arlington were the only remaining jurisdiction in the entire United States (including the Federal Government) to maintain a AAA rating, some commenters on ArlNow would claim that Arlington’s taxes are “unsustainable” and that it’s debt is “out of control”.

    • “even if”. Enough said.

    • Greg

      I think the events of the last couple of weeks show why it’s perfectly reasonable for citizens to be concerned with government spending and debt.

      You sound a lot like those people that not too long ago felt it was nearly unthinkable that the US would be downgraded from AAA status. Now a downgrade may be likely.

      The Country is almost certainly in store for some pain in the next few months/years. Arlington had better be positioning its finances accordingly.

      • Venn Diagram

        Most people/families live on the left side of the figure. Most government entities live on the right side. NO government can sustain the right side forever, but it doesn’t stop them from trying – it’s a great way to get re-elected and works equally well for both parties.

        • normal

          Simply equating a government with a private household budget is far from a perfect analogy, especially when it comes to debt.

          And your diagram’s a fail in a few ways anyway.

          • Burger

            Really. It seems exactly on target. Please expand on your position.

      • normal

        Concerned, yes.

        Screaming about how Arlington’s going to go to hell in a handbasket any day now, no.

      • Jack

        A downgrade possibility has MUCH more to do with the political paralysis then fiscal well being.

    • John Snyder

      Thes, you are right. People can complain about spending priorities that don’t match their own (such is life in a democracy). But Arlington’s budgets balance. Arlington pays its bills. Arlington takes in more than it spends. This is not true of the federal government, or the plans of the GOP House of Representatives. While nothing at all has changed at the local level, they have managed to put the bond ratings of every well run local government into doubt through recklessness at the federal level.

  • JB

    Good. Now give the firemen a raise! Lowest paid in the DC region…totally wrong!

    • Stu Pendus

      The police are understaffed and most of the items in their strategic plan are unfunded. Shameful.

      • austeritynow

        Is that why Arlington cops are all such bitter pricks and can’t do a thing to stop the daily bank robberies?

        • John Snyder

          Every member of the Arlington Police I have ever dealt with has always been professional in every way. They are very responsive to our neighborhood concerns and deserve better than slander from anonymous internet creeps.

  • Nonstandard & Rich

    Well, Moody’s confirmed Bear Stearns top rating in 2008, so we know we can trust their analysis.

  • JimPB

    Is there any well-founded reason(s) for questioning the capability of ArlCo to retire its bonds?

    • Burger

      IIRC, Arlington has the highest per capita bond level in the state of Virginia. Many of the county’s residence are federal workers. Most will not be getting a COLA raise for at least 2 years (and likely longer). This makes it difficult to raise revenue.

      Also, the County Board spends money on stupid crap like a drunken sailor on shore leave after 6 months at sea on things like

      a trolley system no body wants or

      an art museum no one goes to.

    • Burger

      Having a debt load of 100% of county budget isn’t exactly a real good sign of paying off those bonds.

      See county budget of $955 million and bond debt over 1 billion.

      This doesn’t even include the trolley car.

    • Arlwhenever

      Wait until you see how much Arlington County really owes when it has to put its pension obligations on its balance sheet, possibly next year. Also, most of the Arlington County’s recent debt growth isn’t in the general obligation bonds that receive AAA ratings — it’s in other instruments like revenue bonds, or issued by subordinate agencies. Arlington’s County hopes nobody is looking when it repeated refers only to its GO debt, misleading as can be.

      • John Snyder

        does anybody else see something odd about anonymous bloggers complaining about accountability?

  • GetReal

    Anyone that looks at an issuer’s rating is a fool. CDS is the proper tool to measure the risk of default.

    • JimPB

      A check of the ArlCo web page for information on the 20111 budget revealed that 7% of the $955.9 million budget is for capital/debt. Making the payments on the debt seems secure even if ArlCo should suffer a major economic downturn (most likely possibility: a truly significant reduction in the number of Fed employees and contracts).

    • JimPB

      CDS is, in this context, what?

      What’s the CDS for ArlCO, and what does that mean?

      • GetReal

        Credit default swap. You pay an amount upfront to protect your bond from default for a specific period of time. Think of it as an insurance policy for your bond. Since the CDS seller has skin in the game (unlike the rating agencies) it more accurately reflect the risk of default.

        • GuyWhoUnderstandsCDS

          Stop your crazy talk. Are you saying that the debt markets are predictive and the equity markets reactionary??? Bite your tongue with that blasphemy!

          • Arlwhenever


    • Hi_I_am_a_CDS

      CDS is one good tool of several to help assess probabilities of default; however, since the price embodies all sorts of other funny things, and the market may not be liquid, I’m not sure I’d trust it here. Taking a spread over a less risky but comparable asset, such as a U.S. Treasury of similar duration, can control for many of those external factors such as risk tolerance, risk profile, etc. If you really want to go nuts and aren’t convinced that the U.S. Treasury is riskless, you can tack on the (more liquid) CDS of appropriate term on the U.S. Treasury to update your estimate.

  • Charlie

    This is all legalized gambling. And we just gave the pit boss a BJ to keep our prefectness.

    • GuyWhoUnderstandsCDS

      If you buy a stock / bond / whatever and you haven’t acquired the ability to direct management of the issuing entity, then it is by definition gambling. Day traders should quit and go to Vegas. Better odds, waitresses in bathing suits, and free drinks as long as you keep playing.

  • Tabby

    Oh, Lordy, I am so tired.

    • Bluemontsince1961

      Tabby, you’re not the only one, believe me!

  • BoredHouseWife

    Arlington has a higher rating than the US!

    • GetReal

      I’m sure Arl will be downgraded by S&P as with everyone else.


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