Ripples from last week’s downgrade of the nation’s credit rating have hit some bonds issued by Georgia state and local agencies, but so far the move doesn't appear to have hurt taxpayers or the agencies' ability to finance projects and operations.
Georgia retains its AAA credit rating, and officials said the S&P downgrade has no immediate impact on local and state finances.
On Friday, S&P cut its view of the federal government’s creditworthiness from AAA to AA+, citing “political brinkmanship” over Washington’s handling of rising federal debt and a plan to curb spending that S&P said didn’t go far enough.
That triggered S&P downgrades of thousands of municipal bonds nationally tied to federal government revenue over fears of potential federal spending cuts.
Ratings dropped a notch to AA+ for about $1.7 billion in Georgia general obligation bonds where U.S. Treasuries were set aside for debt servicing. Included in that is approximately $371 million in State Road and Tollway Authority bonds, according to Susan Hart Ridley with the Georgia State Financing and Investment Commission.
Bonds issued by several local housing authorities also dipped, as did certain bonds backed by federal office leases in downtown Atlanta.
However, the affected state and SRTA bonds have fixed interest rates and the debt service is fully funded, according to a governor’s office memo. So the lower rating won't change the amount to be paid back.
Brian Robinson, a spokesman for Gov. Nathan Deal, said the AAA state rating illustrates “the state’s underlying strength and confidence” in the governor’s budgeting.
“Georgia’s bonds provide a safe investment because of the state’s conservative fiscal management, and we have done everything possible to maintain the top rating,” Robinson said in an e-mail.
SRTA spokeswoman Malika Reed Wilkins said the authority is "monitoring the situation closely.”
Dick Berry, managing director and senior portfolio manager with Invesco in Houston, said the municipal bond market has held up. Investors still see safety in government securities and there’s more demand for the instruments than supply, he said.
But he said investors will be watching federal budget cuts on the horizon as a congressional committee seeks savings. That could hurt the view of bonds tied to federal programs facing cuts.
“My much bigger concern is six months from now,” Berry said.
S&P also downgraded ratings of bonds issued by local housing agencies across the country, including agencies serving Clayton, Cobb, DeKalb and Gwinnett counties and the cities of Atlanta, Buford, Marietta and Roswell.
Among other things, S&P cited the risk of budget cuts to federal housing subsidies.
S&P downgraded to a AA+ the Buford Housing Authority’s $19.1 million bond issue used to finance construction of the Northwoods Lake Apartments on Peachtree Industrial Boulevard in Duluth. The revised rating still indicates a “very strong capacity to meet financial commitments,” according to S&P.
Buford Housing Authority Executive Director Dorsey Stancil said he wasn’t aware of the downgrade but foresees no negative consequences.
Gwinnett County Commission Chairwoman Charlotte Nash said credit rating agencies likely will pay special attention to how much governments rely on federal funding or on institutions that receive federal funding.
Gwinnett has had a AAA credit rating since 1997. Nash said the additional scrutiny is "just a reflection of what’s going on in the economy overall."
Contributing: Aaron Gould Sheinin
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