Montgomery County financial issues aren’t foreign these days for residents. Just last week, the county received more bad news when it comes to its investments.
While the county has made efforts to reduce debt, Moody's cut the general obligation bond rating of Montgomery County to Aa1 from AAA after several years of operating deficits caused by a growing budgetary imbalance.
The downgrade affects about $417 million of long-term outstanding debt by the county. This may make it difficult for the county to borrow additional money, as it may now be more expensive to do so.
Moody’s particularly blamed the downgrade to, “significant operating deficits in years 2008 through 2011, driven largely by expenditure growth and weak revenue performance.”
The one bright spot for the county is that the Moody gave the financial status of the county an upgraded status of “negative,” back in December, to “stable.”
“Moody’s has obviously studied our actions from the day we took office, and those actions have led to the change in outlook from negative to stable,” said Josh Shapiro, chairman of Montgomery County Commissioners, in a statement released to the media.
What may help the county a bit is the 17.5 percent tax increase that was implemented for this year, even though the prior administration handed down a $10 million budget gap to county officials that took office back in January.
Moody’s reported stated, “the millage increase is expected to generate $26.2 million in new revenues, largely eliminating the accumulated structural imbalance.
Upon assuming office in January 2012, however, new management discovered a $10 million budget gap due to a variety of unbudgeted revenue and expenditure items.”
This marks the second time in a matter of months that the county has received a negative downgrade regarded finances.
In May, Fitch Ratings of New York notified county officials that it was downgrading the county’s bond rating. The previous rating of AAA would change to AA+.
Shapiro has stated numerous times that his staff was dealt with a bad hand when the prior administration lavishly spent money.
“It is clear that the downgrade is a reflection of what took place in this county’s government before January of 2012, and the change in outlook is a barometer of what Moody’s believes will happen in the future,” Shapiro said.
The report did state optimism for the county, as the service clearly sees the strides that the commissioners are making to help resolve the financial woes.
Moody stated: “We believe management’s plans are likely to stabilize the county’s financial position in the near-term, albeit at a narrow level, and could augment reserves going forward. Management has adopted a zero-based budgeting approach, which includes quarterly financial reports to more closely track performance throughout the fiscal year.”
The county has not yet decided if a tax increase will be implemented for a second consecutive year.