St. Louis County loses AAA rating, blames change in rating process
This article first appeared in the St. Louis Beacon. - Standard & Poor’s has informed St. Louis County that it has lost its AAA bond rating, a move that could prompt higher interest costs for the county in any bond issue – and force County Executive Charlie Dooley to drop any reference to the old rating in his campaign literature.
Pam Reitz, the county’s director of administration, said the new rating is the result of a change in how Standard & Poor’s is rating all local governments, in Missouri and elsewhere.
“What Standard & Poor’s has done has gone from a qualitative rating to a fairly structured quantitative rating,’’ she said.
The new rating is AA+ for the county's unlimited-tax general obligation bonds. The rating for the county's special obligation bonds declined to AA, from AA+.
Even as it lowered the rating, the financial agency offered some praise. "The stable outlook reflects St. Louis County's very strong management and our expectation that the rating will not change in the next two years because we believe the county will take the steps necessary to maintain its very strong budgetary flexibility and liquidity," said Standard & Poor's credit analyst John Kenward.
Reitz said that St. Louis County may not be the only jurisdiction facing a change.
“They are saying that every county in Missouri” will likely see a downgrade, Reitz added, because more weight is being given to the state’s Hancock Amendment, in place since 1980, which restricts tax hikes and fees. The state of Missouri, which also has a AAA rating, might see its bond rating dropped as well, she added.
Reitz said the county was also affected by its lower property assessments since the economic downturn hit in late 2008.
The assessments and the Hancock Amendment, she said, “are really the two things over which we have very little control,’’ she said.
Dooley focused on the agency' positive assessment of the county: “I concur with the rating agency’s statement that St. Louis County continues to have a strong economy, strong management and strong budgetary performance. The factors that impacted the ratings change have nothing to do with how St. Louis County manages its finances. We are very proud that we maintained our AAA rating through tough economic times and only because of a change in the system did we get a small bump.
“What matters is we weathered the storm without laying off hundreds of people or filing bankruptcy or spending down our reserves to unacceptable levels. We are in excellent shape and moving forward,” Dooley added.
On its website, Standard & Poor's takes note of several factors in praise of the county and its government:
- "Strong economy, which is part of the broad and diverse economy of the St. Louis metropolitan area;
- "Very strong budgetary flexibility, including available reserves held in funds outside of the general fund;
- "Strong budgetary performance, with positive general fund operations in fiscal 2012;
- "Very strong liquidity providing very strong cash levels to cover both debt service and expenditures;
- "Strong management with financial policies and practices that we consider good;
- "Strong debt and contingent liabilities position;
- "Adequate institutional framework."