Summary

Three major credit rating agencies have awarded a AAA bond rating to King County government based on its 2010 proposed budget, despite the repercussions of a worldwide recession. The agencies cited King County government’s excellent financial management, willingness to make politically tough but necessary budget adjustments, and low to moderate debt levels as key to the county’s continued financially stability and fifth straight year of earning a AAA rating.

Story

Three major credit rating agencies have awarded a AAA bond rating to King County government based on its 2010 proposed budget, despite the repercussions of a worldwide recession. The agencies cited King County government’s excellent financial management, willingness to make politically tough but necessary budget adjustments, and low to moderate debt levels as key to the county’s continued financially stability and fifth straight year of earning a AAA rating.

Preserving King County’s AAA credit rating and transmitting a balanced budget to the King County council was the top priority for Executive Kurt Triplett’s “9 for 9 in 2009” goals for his tenure in office, all of which he achieved. The AAA credit rating allows the county to borrow money for major projects at a cheaper cost, which saves taxpayer dollars.

Executive Triplett complimented the work of his budget office staff and county managers in helping the county maintain its rating, despite increased challenges to King County’s revenue stream and increased scrutiny by rating agencies because of the worldwide credit crisis.

“These ratings are a signal that we are managing our finances wisely and in taxpayers’ best interest, even as we face extreme revenue shortfalls as a result of the worldwide recession,” said Triplett.

King County received AAA bond ratings for the first time in 2005 from all three of the nation's bond rating agencies: Standard and Poor's, Fitch and Moody's. King County received word that the AAA rating has been reaffirmed by all three credit rating agencies. The County has received a formal credit report from both Standard and Poor’s and Fitch today and anticipates a similar report from Moody’s in the next day.

The rating agencies explained the reasoning behind their decisions to affirm King County’s ratings.

Standard & Poor’s Ratings stated that, “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.”

Fitch Ratings stated that, “The county's financial operations benefit from strong management policies and practices, including the requirement that the undesignated general fund balance equal at least 6% of estimated variable annual revenues.”

“The incoming executive is inheriting a government on sound financial footing,” added Triplett. “These affirmed AAA ratings will translate to significant savings for King County taxpayers.”

Ratings agencies cited the county’s rainy day fund as key to the AAA rating and offered words of caution against using the fund in the future to fill ongoing budget gaps: “Fitch believes the county will need to continue to constrain spending or find alternative funding sources to retain reserves commensurate with its very high ratings.”

Standard & Poor’s added that “the county's (proposed) fiscal 2010 budget addresses the projected $56 million shortfall, and the county's projections indicate that reserves will remain at or near current levels. However, there are still many unknowns that could affect this result, including legislative relief, unfunded mandates, the extent to which the economy recovers or weakens further, inflation rates and their impact on COLAs, interest rates, and approved annexations.”

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.