September 15,  2011

County bonds remain A-A-A despite
Standard & Poor's U.S. debt downgrade

New Castle County government still has its triple-A bond ratings and it expects to keep them.

Acting chief financial officer Ed Milowicki told County Council's finance committee that Moody's Investors Service lowered its rating outlook from 'stable' to 'negative' after Standard & Poor downgraded its rating on U.S. Treasury bonds. That was expected to have repercussions throughout the entire municipal debt structure.

But he added that Moody's is the only one of the 'big three' rating agencies his office has heard from and indicated that he does not regard its move as particularly significant. "I don't have any concerns [about it]," he said at the committee meeting on Sept. 13.

"They were under such pressure that they had to do something so they did this."

New Castle is one of only 37 county governments around the country which have the top rating from all three agencies. Fitch Ratings is the other one.

Milowicki said he doesn't know if there have been any changes in the standings of the other 36 counties.

For several years county government's maintaining the triple-A rating has been a practical matter as well as a bragging right.

How bonds are rated is important because that determines at what interest rate underwriters and investors are willing to buy the long-term bonds. That, in turn, affects how much the government has to pay to service the debt during the life of the bonds.

At the same time the top rating is considered an acknowledgement by impartial professional observers that county finances are being managed in a responsible and prudent way.

Milowicki said he has been unable to determine why Moody's modified its outlook, which supposedly reflects its opinion about what to expect in the future. Referring to his request for an explanation, "we haven't heard anything further from them," he said.

However, he added, "I'd like to see them put us back to 'stable'."

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