Oct. 15, 2008
County's AAA bond rating renewed during world-wide financial crisis
Exceptional management, conservative financial policies and Executive's 2009 proposed budget combine to maintain high credit rating
Two national credit rating agencies have given their highest short-term bond ratings for King County and reaffirmed the county's exemplary ratings on all previously issued long term bonds, including each agency's highest AAA rating for certain long term bonds. The high ratings were renewed despite stepped up scrutiny by rating agencies because of the worldwide credit crisis.
Standard & Poor's cited King County Executive Ron Sims' proposed 2009 Budget and his handling of the projected $93.4 million deficit as a major factor in the high ratings: "Management's development of a detailed multi-tiered proposal to address an anticipated budget gap for fiscal 2009 enhances our confidence in the county's ability to continue to meet all of its obligations as well as its ability to meet its financial reserve policy targets."
Executive Ron Sims praised his budget director, chief of staff and department managers for their excellent work to manage the impact of projected revenue shortfalls and the increased cost of delivering services.
"These ratings validate the quality of my balanced 2009 budget proposal and the six-month lifeboat we created using reserves to continue critical services while seeking state help," said Executive Sims. "The council's history of supporting conservative fiscal policies and our healthy reserves are also cited as elements for maintaining the AAA rating."
The nation's bond rating agencies are applying additional due diligence about the credit worthiness of local and state government bonds after the national mortgage and financial crisis. Giving King County the highest short-term ratings and reaffirming all previous long-term bond issues will give the county the most favorable interest rates, therefore lowering borrowing costs.
"Even in King County's most difficult financial times, the competency by which we manage the budget has been given an 'exceptional rating of the highest quality.'" Sims said. "Earning this highest rating when many governments are having difficulty issuing bonds, give us confidence that our capital projects will get the funding they need."
Standard and Poor's also noted the benefit of King County's anticipation of a 2009 structural deficit and its recognition of the need for a 'financial cushion' in previous budgets. The reserves built up in previous years were critical to maintaining some services in 2009. Sims called his proposed six percent reserve for 2009 'sacred' and essential to maintaining the county's AAA credit ratings.
Fitch Ratings awarded King County a AAA rating on General Obligation Bonds citing excellent management, conservative fiscal policies, healthy reserves, low debt and the county's approach to dealing with structural deficit. "The county's solid financial management approach offsets much of Fitch's concerns about the statewide property tax levy limitation."
King County budget and finance managers briefed national bond rating agencies in early October on the Executive's proposed 2009 Budget and the 'lifeboat' strategy to preserve critical safety, health and human services for six months while working with state lawmakers on new revenue tools to deal with the structural deficit facing all counties in the state.
Achieving the highest credit rating means King County will be able to achieve an interest rate of at least 0.25 percent less than comparable government borrowers with a credit rating just one step less and .50 percent for the same borrowers with a credit rating two steps below King County's rating.
In 2005, King County received AAA bond ratings for the first time in history from all three of the nation's bond rating agencies, including Standard and Poor's, Fitch and Moody's. Moody's was briefed on the proposed 2009 budget but is not issuing new bond ratings during the current national and international financial crisis.
The county will be selling $50 million in short term bond anticipation notes in late October to retire previously issued short term notes from 2007. The bond proceeds will be used to provide continued interim financing for jail security upgrades and fixtures/furnishings for the new County Office building (the Chinook building) until long term financing is secured in late 2008 or early 2009.
Standard & Poor's provided its highest short term rating of SP1+ and reaffirmed its AAA long term general obligation rating based on the Executive's proposed approach for addressing serious budget deficits in 2009. Standard & Poor's complimented the county's fiscal management by stating: "Management's development of a detailed multi-tiered proposal to address an anticipated budget gap for fiscal 2009 enhances our confidence in the county's ability to continue to meet all of its obligations as well as its ability to meet its financial reserve policy targets."
Fitch provided its highest term F1+ rating and also reaffirmed its AAA and AA+ ratings on voter approved and council approved general obligation bonds, respectively. Fitch also highlighted the county's prudent fiscal restraint by stating: "...the county continues to demonstrate its ability to constrain expenditure growth when necessary, budget conservatively, implement proactive budget initiatives to deal with future revenue pressures, and maintain prudent reserve policies."