King County AAA credit rating reaffirmed

Wednesday, June 16, 2010

Strong financial management recognized by all 3 major ratings agencies

King County government has preserved AAA credit ratings despite the continued effects of global recession and an ongoing budget deficit. The major credit rating agencies cited strong financial management, a “rainy day” fund, and a willingness to make necessary budget adjustments in a spectrum of economic climates as reasons why King County’s credit outlook remains stable.

“These ratings are confirmation that King County is being responsible and prudent with taxpayer dollars,” said King County Executive Dow Constantine. “A strong credit rating will allow us to serve the public in the most economical way possible.”

Higher credit ratings allow the county to borrow money for projects at lower interest rates. The reaffirmed ratings mean that King County will be able to achieve an interest rate of at least 0.20 percent less than other comparable government borrowers with a credit rating just one step less and 0.75 percent for the same borrowers with a credit rating that is two steps lower than King County’s.

In the ratings report, Standard and Poore cited “Realistic revenue projections, a willingness to make politically difficult service reductions, and creative efforts to realign programmatic responsibilities with funding sources all contribute to the county's capacity to meet its reserve targets and exceed forecasts.”

Fitch ratings stated that “using multi-year, rather than one-time, solutions to resolve the county's ongoing structural deficit is achieving long-term financial stability.”

Moody’s Investors Service cited “management’s prudent planning efforts, including conservative revenue projections and a built-in structure to promote under-spending its budget,” as a main reason why King County has, “…maintained the county’s satisfactory financial position, thus placing it in a favorable position to weather the budgetary stress resulting from the economic downturn.”

Fitch ratings did caution that “due to ongoing revenue pressures, the county's ability to continue expenditure constraints and/or find alternative sources of funding in order to avoid budget deficits will be critical to retaining the current high ratings.” Fitch continued, “However, the county is now faced with closing a $60 million projected deficit in fiscal 2011 through service reductions if the county council remains reluctant to propose property and/or sales tax increases.”

The ratings were affirmed as the three major credit agencies assigned the highest possible ratings for $60 million in Bond Anticipation Notes (BANs) that the county expects to sell competitively on June 7, 2010. The BANs will be used to provide interim financing for a countywide project that is already underway to transform and unify financial, human resource, and budget systems. 

---From the office of the King County Executive


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