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2020 News

Moody’s, S&P Affirm County’s Triple-A Bond Credit Rating

June 12, 2020

Contact: Larry R. King, 215-348-6413, lrking@buckscounty.org

In spite of challenging financial times, Bucks County’s superior bond credit ratings will continue, Moody’s Investors Services and Standard & Poor’s both announced recently.

Moody’s announced that its coveted Aaa rating, which Bucks County first attained in 2010, will remain unchanged. S&P announced that it, too, would affirm its AAA rating for Bucks, which the county first earned in 2014. 

“We are thrilled that Bucks County has been able to maintain these bond ratings in such trying times,” said Diane M. Ellis-Marseglia, chair of the Bucks County Commissioners. “The county is always working hard to meet the needs of its taxpayers and residents, especially when faced by challenges such as those posed by the current pandemic."

Both are the highest ratings possible. They enable Bucks County to sell its bonds at the lowest interest rates, keeping debt service costs to a minimum.

The ratings also make the county’s bonds attractive to investors, increasing demand for the bonds and, as a result, making it easier for Bucks County to raise money. The premium placed on the county’s bonds means that investors will pay more than face value for the bonds.

A tangible example of savings resulting from the county’s bond ratings came this week, when the county authorized a bond issue that will save taxpayers almost $2.76 million, far exceeding expectations.

On May 6, the county commissioners had approved an ordinance to issue federally taxable general obligation bonds not to exceed $75 million for the purpose of re-funding the county’s 2013 bond issues. The county’s Finance Department, finance advisor, bond counsel, underwriters and underwriters’ counsel continued to watch market conditions for favorable timing, and on Thursday authorized a deal to lock in rates that were most advantageous to the county.

At closing, the county will issue bonds totaling $58,970,000, netting an interest savings of $2,757,778. Initial expectations had been for savings between $1.5 million and $2 million.

In affirming Bucks County’s Aaa bond rating, Moody’s cited the county’s large and wealthy tax base, proximity to major employment centers, low debt burden and manageable pension liabilities as positive factors. Moody's

At the same time, both credit rating agencies tagged the county’s outlook as “negative,” saying Bucks needs to better balance its expenditures with its revenues and cash reserves if it expects to maintain its current ratings.

The ongoing coronavirus outbreak poses financial risks, but Moody’s report notes that Bucks has received CARES Act funding from the federal government “and is taking strong budgetary action to address issues posed by the pandemic.”

And while COVID-19 poses no immediate credit risks for the county, “the situation surrounding coronavirus is rapidly evolving and the longer-term impact will depend on both the severity and duration of the crisis,” Moody’s said. 

Moody’s negative outlook “reflects our expectation that the county will be challenged in its efforts to return to structurally balanced operations and maintain reserves at their current levels,” the report said.

Moody’s noted that Bucks County officials historically have been reluctant to raise taxes, but “we expect that revenue increases, as well as management of expenditures, will be necessary to return to balanced operations going forward,” the report said.

S&P echoed much of Moody’s assessment, touting the county’s healthy economy, strong management and sound financial policies in renewing the county’s AAA rating. As with Moody’s, S&P tied its “negative” outlook to the continuing reduction of the county’s reserves. S&P

“The county anticipates a small deficit in fiscal 2020, before trying to turn budgetary performance positive in fiscal 2021, as it plans to implement small millage increases over the next few years, coupled with not issuing additional debt,” S&P stated.

“(I)f the county takes the corrective actions that it is planning on and these actions turn the county’s budgetary performance positive, resulting in an improvement to available reserves back to levels that we consider very strong, we could revise the outlook to stable,” S&P’s report said.

Bucks County’s Board of Commissioners has raised taxes only three times in the past 14 years, at times opting instead to tap into the county’s general fund reserves during leaner years. The current operating budget of $452.6 million was passed by the previous administration with a 1-mill tax increase, supplemented by a $7.6 million draw from the county’s $33.2 million general fund balance.

“We knew when we took office that we would have to make important decisions about county finances,” said Bob Harvie, vice chair of the county commissioners. “The negative outlook on our bond rating reflects the decisions made in the past to balance the county budget by raiding county savings.

“We realized very quickly that we could improve our situation through refinancing our bonds,” Harvie said. “Our finance staff and the professionals we hired did an outstanding job over the past few weeks, and that’s reflected in how much we have saved through the refinancing.”

As part of the county’s transition team recommendations, all department heads have been asked to propose ways of reducing their expenses by at least 2 percent in submitting their 2021 budget requests.