June 22, 2011
Maricopa County government gets "AAA" bond rating; prudent budget policies cited
At an economic time when more governments are receiving lower financial grades, Maricopa County’s budget policies just got a clean bill of health. The county has received a “AAA” rating – the highest possible – from two separate national bond rating firms. Both Standard & Poor’s and Fitch Ratings attached AAA ratings for the county’s general obligation bonds.
"The (credit) rating reflects what we view as the county’s consistently strong and improving general fund financial position despite declines in revenue due to the recent economic turndown," the S&P report stated. "We believe Maricopa County’s strong financial management, reflective in its proactive budgetary adjustments and continued strong reserves, continues to provide support for the AAA rating."
"The commitment to fiscally conservative budgeting practices has been strong and unwavering as long as I have been on the board," Board Chairman Andy Kunasek said. "We have accomplished this while lowering the tax burden on our residents. This is testimony to our long-range planning, delivering efficient, low-cost services to our people."
The practical effect of the high ratings would be in lower interest and insurance rates when the county borrowed money. Currently, the supervisors follow a "pay-as-you-go philosophy," including on capital projects like the new Criminal Court Tower, using accumulated savings for construction and avoiding bonded debt.
District 4 Supervisor Max Wilson said he was pleased, but not surprised, by the rating.
"It’s a formula that works in business,” Wilson said, “more governments should learn they can keep costs down by avoiding borrowing and interest payments. For example, by building the court tower with savings, the county saved approximately $190 million in interest financing."
Monday, the supervisors approved a budget of $2.3 billion, with a property tax levy decrease and virtually no requests for additional funding.
According to the Fitch Ratings report: "County management is tenured and has demonstrated the ability to date to respond effectively to deteriorating economic and revenue forces and maintains a solid financial posture; Fitch has consistently noted management as a positive credit factor….. Despite the economic pressures and their impact on various revenue sources, the county’s financial profile remains healthy. Operating reserves remain robust, as management has adjusted spending levels over the past several fiscal years."
With its diverse economic base, past performance of strong reserve levels, and low direct debt burden, both Standard & Poor’s and Fitch Ratings view Maricopa County's long-term outlook as "stable." Recent credit reports have consistently given the county high marks. The AAA is considered the highest, “premium quality” rating. In May, 2010, Maricopa County’s credit rating for general obligation bonds also received a premium quality grade from Moody’s Investor Service.
According to the ratings services, downgrades have outnumbered upgrades among governmental jurisdictions recently. The Maricopa County’s bond ratings is thus a positive reflection of the county’s financial position. According to the “2011 Outlook: U.S. Public Finance Sector Profiles” issued by Fitch Ratings on March 30, Fitch anticipates that downgrades will continue to outpace upgrades.
Maricopa County, located in south-central Arizona, is the fourth-largest county in the country with a population of just under 4 million, or approximately 60 percent of the state’s population. Maricopa County has a diverse economy that includes tourism, trade, mining, construction and high-tech manufacturing and continues to be Arizona’s major political, financial, economic, and population center.
Maricopa County’s bond rating reports are published at the following location: http://www.maricopa.gov/Finance/debt.aspx.