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MontCo Redevelopment Bond Rating Downgraded

Ratings agency says county's general fund balance of 5.5 percent of budgeted expenditures is 'inconsistent' with top credit rating.

Citing "a sizeable decline in the county's general fund balance following several years of large operating deficits," Fitch Ratings today downgraded more than $18 million in debt issued by the Montgomery County Redevelopment Authority from its highest "AAA" rating to a rating of "AA+."

In a statement issued to the media, Josh Shapiro, chairman of the county's Board of Commissioners, called the downgrade and its associated report "disappointing because we have just begun to turn things around and dig ourselves out of the hole."

"Today’s report from Fitch and their downgrade of the Redevelopment Authority’s bond rating to 'AA+' makes clear that the irresponsible spending over the past four years severely depleted the reserve fund to an unacceptably low level and dug Montgomery County into a deep financial hole that will take time to recover from," Shapiro said in the statement.

Despite the downgrade, Fitch painted a generally rosy picture of the county's economic fundamentals, noting that the county's per capita income was almost 50 percent higher than state and national averages while its unemployment rate was below average.

"Job growth and development continues to occur around the Pennsylvania Turnpike exchanges at King of Prussia, Plymouth Meeting, Fort Washington and Willow Grove given the easy highway access to several major highway systems," Fitch Ratings said in its report.

Fitch also reported that the current county administration is "actively seeking ways to streamline government and cut expenses."

Fitch called the AA+ rating outlook "stable," meaning the rating is unlikely to change in the near future.

Along with Moody's and Standard & Poor's, Fitch Ratings is one of three nationally recognized statistical rating organizations (NRSROs) designated by the U.S. Securities and Exchange Commission (SEC) to issue credit ratings on companies, governments, and other financial entities.

The Fitch rating applies only to the roughly $18 million in debt issued by the redevelopment authority, more than $11 million of which was issued in 2007 to fund the construction of the parking garage at Main and Cherry Streets in Norristown. The county is seeking to renegotiate those bonds' terms from a variable interest rate to a fixed interest rate, which trigged the Fitch review of the county's credit.

Most of the county's roughly $400 million in debt is rated by Moody's, which said in December that the county's credit rating remained at its highest "Aaa" level but warned that it could face a downgrade if unfavorable financial trends continued.

"We will build on the progress we’ve made in our initial four months in office. Our efforts were noted positively and acknowledged by the Fitch analysts," Shapiro said.

Lee May 09, 2012 at 02:10 PM
"Redevelopment Funds" are our property taxes. Old guys & New Team in our local Gov all over spend our taxes, and taxes ALWAYS increase. There is a very interesting bill in Harrisburg to elim property taxes via a newly broadened sales and income tax - bill HB 1776. Saw a presentation and it is a refined bill that was brought up during Gov Rendell's era and knocked out. Politicians luv prop taxes as they help them w/ voting segments, but for the State and its farmers, residents, renters and businesses, prop tax elimination would be life saving. Foreclosures would be eased dramatically, small farms would not be burdened and have to sell their land. Teachers who often own their own houses will also save and keep their good jobs. The plan is structured to provide schools with excellent funding via the sales tax and income tax revenue. Yes the sales tax and income tax would be increased slightly, but it so much broader you will barely notice it in comparison to the dramatic savings of not paying prop taxes. HB 1776 will attract new businesses w/ jobs to PA, which is key for our grads and out of work friends. Pls consider reading it @ - http://dbta101.wordpress.com/2011/11/19/h-b-1776-the-property-tax-independence-act-part-1-2/
Joe Koenig May 09, 2012 at 02:58 PM
@Lee: OMG what would our School Boards do without six meetings on how to fudge a budget?? They might even have to really negotiate salary packages with teachers, staff and Administration. We might even get reimbursed in a timely manner for the St. Mary's students and there might be a realistic look at special ed costs which have gotten out of hand. I'm sure there is a downside to this, as I have not totally thought it out. But one concern I have is that will funding be the same per student throughout the Commonwealth? or will they find a way to overfund some districts? It's certainly worth a debate!!!
Golden Cockroach May 10, 2012 at 02:48 PM
"Job growth and development continues to occur around the Pennsylvania Turnpike exchanges at King of Prussia, Plymouth Meeting, Fort Washington and Willow Grove given the easy highway access to several major highway systems," Fitch Ratings said in its report. While Pottstown sits in the "wings" trying to figure out how to survive as MontCo disdainfully and shamelessly "dumps" the poor and needy into our communities while encouraging more and more bad income investors to ply their unsavory objectives here. Our community has little to offer in terms of jobs, safe & comfortable housing, or role models for the children, (unless you consider the corner drug dealer a role model). Clearly, Pottstown was not included in the findings that the per capita income is up 50% higher than state and national averages. Assuming, of course, that Pottstown was even included in Fitch's ratings.

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