Recent Moody’s Action Ignores Fairfax County’s Strong Fiscal Management
July 28, 2011
As a result of the national debt ceiling issue, Moody’s Investors Service recently placed the Aaa bond rating of the U.S. government on review for possible downgrade. Subsequent to this action and as a result of Moody’s contention that the economies of both the commonwealth of Virginia and Fairfax County are closely aligned with the federal budget and therefore vulnerable to dramatic changes to federal contracts, leasing and employment, Moody’s placed both the commonwealth and Fairfax County’s bond ratings on review for possible downgrade.
This action belies the strength and diversity of the county’s economy, which has long been cited by the leading credit rating agencies as evidence of its top rating of triple-A (“Aaa”). As recently as July 6, Moody’s praised Fairfax County’s strong budgetary control of spending, funding of long-term liabilities and conscientious reliance on a number of self-imposed financial and debt management guidelines as it reaffirmed the county’s credit rating.
Fairfax County’s continued strong fiscal management and low overall debt burden brings stability in uncertain national economic times. In addition, through careful fiscal planning and the continuous application of the Ten Principles of Sound Financial Management adopted by the Board of Supervisors 36 years ago, the county has held a Aaa rating from Moody's Investors Service since 1975, an AAA rating from Standard & Poor's since 1978, and an AAA rating from Fitch Ratings since 1997. As a result of these superior ratings, the county has saved over $486.3 million since 1978 on bond and refunding sales.
Fairfax County has a strong history of taking decisive actions to meet its financial obligations. It has weathered projected deficits, taken programmatic reductions and eliminated positions to ensure an annual balanced budget.
Fairfax County does not borrow for its operating budget and its policies ensure that reserves fund the costs of planned replacement of major equipment or infrastructure over several years. Fairfax County has a well-structured plan in place to balance the need for public facilities with the fiscal capacity of the county to provide for those needs.
Fairfax County’s recent success in the bond market occurred even when municipal interest rates were volatile due, in part, to the economic situation and the federal budget and debt crises. The competitive sale of the county’s bonds illustrates the value of the county’s AAA ratings as investors and underwriters acknowledged Fairfax County as a leader in a turbulent market.
As they reaffirmed the county’s top ratings within the last year, all three rating agencies cited the county’s self-imposed financial and debt management guidelines as a strength.
- Fitch noted the county’s “stable financial performance, based on the county’s continued adherence to sound financial management practices, conservative budgeting, and proven ability to respond to changes in its operating environment.”
- Moody’s indicated that “in spite of ongoing budgetary challenges, the County continues its practice of strong budgetary control of spending, funding of long-term liabilities and a conscientious reliance on a number of self-imposed financial and debt management guidelines.”
- Standard & Poor’s said, “The county’s strong financial management practices have helped it manage through strong periods of growth as well as economic slowdowns while maintaining what we consider a strong and stable financial profile.”
Despite many competing county needs that deserve funding during this challenging economic time, Fairfax County balanced its budget by making tough choices among competing priorities, adhering to risk averse, time-tested policies and engaging in highly successful, long-term fiscal strategies. There are no plans to change the way major projects are financed; the federal budget and debt crises will be addressed by monitoring the situation and making adjustments as the markets respond.Fairfax County has a proven track record of doing what has been necessary to balance budgets every year, maintain essential services and adjust capital programs to meet recessionary challenges.
Fairfax County has a robust business community with a strong, diversified economy. In July, Moody’s noted, “positioned for long-term stability, the county’s economy is diverse with considerable commercial activity including high-technology, telecommunications, defense, health care and financial services firms.”
Following are key indicators of the strength of the county’s economy:
- Home values have increased in each month of 2011 compared to the same month in 2010. The Washington area is the only large metro area that has experienced gains in home prices during 2011.
- Fairfax County has experienced job growth since the spring of 2010. At the end of 2010, 11,800 jobs had been created in the county. The unemployment rate of Fairfax County residents is just 4.3 percent.
- In 2010, 154 companies announced that they would locate or expand business operations in the county and create more than 6,400 jobs — in contrast to communities around much of the country that struggle to hang on to employers and jobs.
- In 2010, Fairfax County had the highest percentage of jobs — nearly 34 percent — in technology industries of any county among the major U.S. technology markets, based on Bureau of Labor Statistics/Virginia Employment Commission data on unemployment insurance-covered jobs.
- With more than 113 million square feet, Fairfax County is the second-largest suburban office market in the nation.
- The county has more companies on the Fortune 500 than 30 states. The revenue of these Fortune 500 firms — which represent a range of industries — account for 53 percent ($129.3 billion) of the revenue production of all of Virginia’s Fortune 500 companies.