Arlington maintained its prime Aaa investment rating from Moody’s, but the firm argued that the county’s close connection with the federal government makes the future of its finances a bit uncertain.
“Today’s actions are based on an expanded evaluation of the exposure each municipality has to the U.S. government, including economic sensitivity to federal spending reductions, dependence on federal transfers and exposure to capital markets disruptions,” Moody’s Managing Director Naomi Richman said in a press release. “Issuers with outlooks that remain negative are viewed as having greater exposure to potential cuts in federal employment and federal spending.”
Arlington isn’t the only Northern Virginia locale to receive a negative outlook. Alexandria, as well as Fairfax, Prince William and Loudoun counties, have all been given negative outlooks due to the area’s “linkage with the U.S. government.”
“Arlington remains in a strong financial and economic position,” County Board Vice Chair Mary Hynes said in a statement, in response to the Moody’s decision. “During the bottom of the economic downturn, the County demonstrated its resilience and diversity. Our key economic indicators outperformed most in the region and the nation. Most recently, despite the threat of federal government budget reductions, private sector investment in the County has increased and housing values have remained stable.”
Hynes noted that the county maintains a sizable reserve fund as part of its budget.
“Even in the most difficult times, Arlington has remained committed to funding our reserves, including action this month to increase the County’s operating reserve to 5 percent of our budget,” she said.
The county is expected to brush up against one of its self-imposed debt limits in financial year 2013. Still, officials say they’re following the bond market closely.
“The County is not currently in the market with any bond issues and has no plans to go to market until mid-2012,” Arlington said in a press release. “The County last sold bonds in June 2011, with very favorable interest rates and market reception. Any downgrade of the County’s credit rating could result in higher interest rates on future bond issues. The County and its financial advisors are monitoring the situation and market reaction closely.”