The County of Los Angeles once again received the highest short-term ratings from the nation’s top three credit rating agencies for the County’s annual cash flow financing.
The ratings by Moody’s, Standard & Poor’s, and Fitch Ratings mean the County can expect to pay less when borrowing money that is needed to finance operations while awaiting tax receipts and other revenues.
The Board of Supervisors has authorized the sale of up to $1.1 billion Tax and Revenue Anticipation Notes (TRANs) for the 2012-13 fiscal year. Los Angeles County has issued TRANs annually since 1977 to assist with cash management. The County’s short-term borrowing program is necessary since the County receives certain revenues, such as property taxes, on an uneven basis throughout the year. The strong confidence by the credit rating agencies means the County secured the lowest interest it has ever received on a TRANs sale, in fact, no other California county with similar ratings has received a lower interest rate in the market this week.
The announcement of an “F1+” rating by Fitch represents the firm’s highest possible short-term credit rating, assigned to those organizations with an “exceptionally strong capacity to meet its financial commitment” over the next 12 months. In its announcement, Fitch stated the County’s “financial operations are well managed with strong general fund balances and significant reserves.”
Standard & Poor’s assigned the County an “SP-1+,” its highest rating for short-term municipal notes, noting the County’s long-term creditworthiness and conservative cash flow projections.
Moody’s has assigned a rating of “MIG 1,” which is defined as providing “superior credit quality,” whereby “excellent protection is afforded by established cash flows.” Moody’s cited that in 2012 the County was able to keep the net cost of state budget cuts to essentially zero as the County maintained the practice of not backfilling any programs which were affected by state funding cuts.
“These exceptionally high bond ratings, and the record low interest rates, represent a vote of confidence in the County’s fiscal stewardship in a most difficult and unsettled economic environment,” Board of Supervisors Chairman Zev Yaroslavsky said. “Our Board’s sustained policy of living within its means has reduced our borrowing costs and yielded tremendous savings that inure to the benefit of all County taxpayers.”