NCCo could face bond rating downgrade by Moody's

WASHINGTON -- New Castle County is one of 162 local governments in 31 states whose AAA bond rating will be reviewed for possible downgrade by Moody's Investor Service because of the impasse over how to raise the nation's borrowing limit.

A downgrade, which would result in higher interest rates, could slow county projects and related job creation, New Castle County Executive Paul Clark said Friday. Or, it could mean projects would cost taxpayers more.

But Clark said if a downgrade happened, his administration would not respond by raising taxes.

"Philosophically, we will not raise taxes in New Castle County with the economy the way that it is," Clark said.

The ratings agency's announcement Thursday afternoon reflects its assessment that some AAA public finance ratings would likely be indirectly affected by a potential downgrade of the U.S. government's bond rating, which is also under review.

The local governments were selected because of high federal employment and exposure to capital markets disruptions. Kent and Sussex counties do not have a AAA bond rating.

New Castle County acts as a clearinghouse for federal funding for Section 8 housing and grants for nonprofits, Clark said. Of its 1,400 employees, he estimated, 40 are paid with federal funds.

Clark said the county would challenge a downgrade. The county has a reserve fund of $44.8 million in addition to its rainy-day fund of up to $32 million.

"Let's hope everybody in Washington figures out how to run the government," he said. "But if this actually comes down, we believe we could make an argument with Moody's and other agencies to say that we're prepared and we can handle anything like that."

Sen. Chris Coons, the county's former executive, lashed out at tea party Republicans in a statement Friday, saying the review is one result of their "inability to accept responsibility for fulfilling the nation's obligations."

"The announcement from Moody's today affects municipalities in 31 states, including those of the very tea party Republicans who are insisting on steering our nation's economy off this cliff," the Delaware Democrat stated. "I hope that this sobering news will instead help steer them instead to a responsible compromise."

Earlier this month, Moody's placed the ratings of five states -- Maryland, New Mexico, South Carolina, Tennessee and Virginia -- under review for a possible downgrade. On Thursday, Moody's also placed under review 14 housing finance programs and one university, none in Delaware.

About 400 other AAA-rated public finance credits have not been placed under review.


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