Gov. Mark R. Warner traveled to New York City on Friday to meet with the bond agency that threatened to downgrade Virginia's sterling credit rating last year and to make his pitch that the state is once again on solid fiscal ground after passing a $1.5 billion tax plan just weeks ago.
After spending nearly two hours with four members of Moody's Investors Service -- during which the governor and his staff presented details of the state's new $60 billion budget -- Warner (D) characterized the meeting as "positive" through his press secretary, Ellen Qualls. He said the Moody's officials reacted favorably to news that Virginia lawmakers had harnessed the state's repeal of the car tax. Furthermore, he reported that they seemed "encouraged" by plans to boost the commonwealth's depleted rainy-day fund.
A representative for Moody's would not comment on specifics of the meeting. Officials for Warner said the firm would make a decision on the state's credit rating by the middle of next month.
But Steven J. Kantor, a private investment manager who was hired by the state and accompanied Warner and his staff to the meeting, said that by boosting state revenue through increased levies and freezing the car tax, Virginia is in a much better financial position than it was three months ago.
In February, Kantor told House lawmakers that Virginia would lose its reputation for creditworthiness unless it resolved its long-term budget problems and invested in roads, schools, colleges and prisons.
"I think [the Moody's officials] were impressed that the state had addressed its long-term fiscal future," Kantor said.
Several Republicans who opposed the details of the final budget said they still were not convinced that Virginia's excellent credit rating was saved by the tax increase. They said the recovering state and national economies could just as easily be the answer.
"I don't think you can accept the premise that just because we keep our triple-A bond rating, it was because we raised taxes," said House Speaker William J. Howell (R-Stafford), who opposed tax increases during the session. "It's because we're in a booming economy, and Virginia is a leader in that economy."
Whether Virginia keeps its elite bond rating, which it has held since 1938, became a key issue for Warner and lawmakers who favored a tax plan that would raise more money over the next several years. The legislature passed a budget this month that adds more than $1.5 billion to the state's treasury over two years.
The sales tax will rise to 5 percent, and the tax on cigarettes will increase to 30 cents a pack. Taxes on income and groceries will be cut, and some corporate tax breaks will end. Taxes for recording property deeds will go up. The state's car-tax relief program will be frozen beginning in 2006.
Bond ratings are meant to provide lenders with an objective marker of a government's fiscal stability. The higher the rating, the less it costs a state to borrow money.
Besides visiting Moody's, Warner administration officials plan to talk with two other rating agencies this month. Representatives from those firms said yesterday that the steps taken by the state to fund public education and health care were good signs that Virginia is handling its finances responsibly.
"What Virginia's been able to do is very encouraging," said Claire Cohen, an analyst for Fitch Inc., a rating agency that will talk with administration officials next week.
Warner's trip comes as his administration reported a 22.5 percent jump in April general-fund tax collections over the same month a year earlier, putting annual state revenue growth at 9.5 percent. Warner had originally forecast 6.7 percent growth. Those numbers, combined with the tax increases, have convinced some members of the legislature that the state should retain its good credit.
Bond companies "always keep things close to the vest, so it's hard to tell what they think," said Del. Vincent F. Callahan Jr. (R-Fairfax), chairman of the House Appropriations Committee, who was not in favor of the final tax plan. "But we should be all right."