Moody's Keeps Negative Outlook on Prince William Bond Ratings

Jurisdictions across Northern Virginia are calling Moody's Investor Service's judgment "shortsighted" after its decision Wednesday to keep a negative outlook on local bond ratings.

Prince William County Chairman Corey Stewart was among a group of eight local government leaders who issued a joint statement Wednesday in response to a Moody's review of 161 local Aaa-rated jurisdictions "indirectly linked" to the U.S. federal government, 

The local governments  because it generally reduces interest rates when they borrow, saving their taxpayers money.

"[This outlook] in no way reflects the continuing strength and sound fiscal management of our local communities. These ratings will increase the cost of borrowing for us all, forcing governments across Northern Virginia to reevaluate and perhaps curtail capital spending. The ripple effect of this situation on our local budgets could threaten basic services, just as we are slowly emerging from the multi-year, cyclical economic downturn," the leaders said in the statement.

Moody's revised its outlook to stable for two states and 119 jurisdictions. However, several local governments were not among them, including Vienna, Fairfax City, Herndon and Alexandria, and Fairfax, Loudoun, Prince William, and Arlington counties. The Commonwealth of Virginia also retained its negative outlook as a state.

The decision to keep a negative outlook came after months of Moody's analysis, the investor service said, which judged jurisdictions on various measures of economic sensitivity, including federal and health care employment and federal procurement activity. It also took into account direct and indirect exposure to disruptions in capital markets, such as public hospital expenditures and amount of short-term debt.

In a statement, Naomi Richman, Moody's managing director, said issuers with negative outlooks are believed to be at greater risk to federal layoffs and budget cuts.

Virginia had more local governments under review — 15 — than any other state in the country. Five of them (Charlottesville and Albemarle, Chesterfield, Hanover, and Henrico Counties) were returned to a stable outlook in Wednesday's review.

In July, a Moody's representative said Virginia was above average in federal employees in percentage of the state's total employment, and, the state's number of federal procurement contracts accounts for a large percentage of the state GDP. 

For this reason, it was more sensitive to national economic trends, he said.

But the federal procurement is "not tied to one particular agency, contractor or military base," local leaders said Wednesday.

"Top defense contractors are headquartered in Northern Virginia, and contractors here serve both defense and nondefense sectors," they said.

Assigning a negative outlook to the Virginia jurisdictions ignores history and the area's ability to weather tough economic times, they said, including the recession in 2008 and 2009.

Leaders also pointed to longstanding relationships and plans like Base Realignment and Closure (BRAC) projects and the rail to Dulles Airport, which they say reflect a history of the federal government in Northern Virginia, commitment to building infrastructure and future opportunities to attract global investment.

"Since no one can predict what the federal government will do or how its actions may impact Northern Virginia, focus should be placed on what is known — how this region has managed the unexpected while maintaining financial excellence," the leaders said.