If the federal rating is downgraded, Moody’s will assess whether the jurisdictions under review deserve better credit than the U.S. government does. Moody’s officials said they would examine each jurisdiction individually, a process that could take months.
July 28 (Bloomberg) -- California Treasurer Bill Lockyer talks about the likely impact of a possible failure to raise the U.S. debt ceiling on the finances of individual states and California's decision to secure $5.4 billion in loans to cope with any credit-market disruption related to the debt ceiling. Lockyer speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
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The move by Moody’s came nine days after the ratings agency put Maryland, Virginia and three other states on a credit watch, warning it would review and might downgrade each within a week following a federal downgrade.
The July 19 warning forced Maryland officials to delay a planned refinancing of $200 million in debt this week. But the state did go forward with a scheduled sale of new debt Wednesday — the first by any state amid the urgent negotiations to raise the federal debt ceiling — to fund school construction, public safety and other capital projects.
The warning appeared to have little effect on investors; Maryland sold $418 million in bonds at a near record-low interest rate of 3.07 percent.
Prince George’s County earlier this year finally received a AAA rating from Fitch, another of the three major ratings agencies, and new County Executive Baker hoped that would set the stage for a proposed $50 million economic development fund that would rely on a combination of loans, grants and bonds. Lowering the county’s AAA rating would cost the county money it can ill afford in its $2.7 billion budget, Baker said.
“I’m pretty disgusted that Fairfax County would end up on this list, given the fact we have been scrupulously well-managed, and we have handled our debt so carefully,” Fairfax Board of Supervisors Chairman Sharon S. Bulova (D) said late Thursday. She said the county has maintained the highest credit rating for 36 years.
Any downgrade of Fairfax County’s credit rating would cause the county to reevaluate and perhaps postpone capital spending on local roads, schools and libraries, Bulova said.
Officials also noted that as recently as July 6, Moody’s had praised Fairfax County’s shrewd handling of its finances.
Prince William plans to sell “several hundred million” in bonds over the next five years for park, road and school projects, although no sales are planned in the next few months, Stewart said.
Moody’s put Montgomery on a watch list for possible downgrade last year, in part because of shrinking county reserves. The county made a series of painful financial fixes and was taken off the watch list.
Now it’s back.
“We did everything to put the county on solid footing, and now this will completely undermine all this effort” if the review turns to a downgrade, said Montgomery County Council member Nancy Navarro (D-East County).
Staff writers Jennifer Buske, Aaron C. Davis, Caitlin Gibson, Christy Goodman, Fredrick Kunkle, Michael Laris and Miranda S. Spivack contributed to this report.
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