Moody’s Upgrades Marin's Credit Rating to Triple A

The country's leading provider of credit ratings has upgraded the County of Marin from Aa1 to Aaa, the highest issuer rating possible, affirming the County’s financial management and disciplined approach to reducing its long-term obligations.

Marin joins San Mateo County as the only California counties with an Aaa issuer rating from Moody’s. 

“The Issuer Rating upgrade primarily reflects the county's sound financial management, demonstrated throughout the economic downturn, and its proactive approach to reducing financial pressures posed by pensions and post-employment benefits,” according to Moody’s.

While previously rated AAA, the highest rating possible for the past two years by Standard & Poor’s and Fitch rating agencies, Moody’s rating of Aa1 was a result of its determination that all California counties were either held stable or downgraded due to the national economic downturn and the State of California’s budget deficit.  Moody’s recent upgrade to Aaa reflects Marin's successful long-term restructuring process, the utilization of healthy reserves to decrease unfunded pension liability, and the establishment of a retiree health trust and commitment to fully fund its retiree health liabilities. 

“It’s wonderful to see the County’s hard work over these last several years has been acknowledged by Moody’s,” said Judy Arnold, President of the Marin County Board of Supervisors.  “It doesn’t get any better than that.”

County Director of Finance Roy Given noted that Marin, according to the Moody's report, has “a strong financial position with ample liquidity and reserves." Moody’s also cited that Marin’s "enhanced budget management and demonstrated execution of financial planning are credit positive."

“This was a great team effort,” said County Administrator Matthew Hymel. “We now have a budget that is financially stable, and the Board deserves a lot of credit for its financial discipline in leading us to this point."

Moody’s also noted: “The county's financial profile has consistently compared very favorably with other major metropolitan counties in California and the U.S., and these recent cost-cutting measures position the county well to maintain that comparative advantage.”

One reason the County’s budget has improved is that the Board of Supervisors allocated $46 million to pay down pension and retiree health unfunded liabilities.  Deputy County Administrator Daniel Eilerman said the Board’s recent investment of $46 million in one-time reserves to accelerate the payment of pension and retiree health liabilities results in an annual savings of $1.2 million next year and $3.6 million after 2013-14. 

Noted Moody’s, “The County’s commitment to reducing pension exposure is evidenced further by a board policy authorized in fiscal 2013 to apply savings attributable to the state’s Public Employee Pension Reform Act (PEPRA) to further pay down the UAAL in increments, with savings estimated at $3 million over the next five years …”

Consistent with their reevaluation of pension obligation bonds for all California local governments, Moody’s downgraded the County’s Pension Obligation Bonds to Aa2 from Aa1.

“The downgrade of the pension obligation bonds to Aa2 reflects our reevaluation of the relative risks of general fund-backed debt and California local governments' general obligation bonds,” said Moody’s. “Though the pension obligation bonds are absolute and unconditional obligations of the county, they do not benefit from the unlimited tax pledge securing general obligation bonds.”

Marin’s Series 2001 and 2010 Certificates of Participation were confirmed at Aa2.  The outlook is stable for all ratings.

“Moody’s change to the AA2 rating is a statewide issue with respect to all pension obligation bonds in California and is not reflective of Marin’s financial position or credit worthiness,” said Given. 

A copy of Moody’s statement is available here.