The debate over raising the U.S. debt ceiling might jeopardize the top credit ratings of several metro Atlanta governments, taking a hit on local taxpayers’ pocketbooks.
Moody’s Investors Service announced Thursday that it would review and possibly downgrade the Aaa ratings of 162 local governments across the country -- including Cobb, Forsyth and Gwinnett counties and Gwinnett County Public Schools in Georgia.
Lower ratings likely would make it more expensive for those governments to borrow money, forcing them to pay higher interest rates when they finance new schools, roads and other construction projects. That would cost taxpayers more money.
Local officials say they’re confident they’ll keep their top ratings. But at least one took news of a possible downgrade hard.
"This is the direct result of the federal government and the fiasco going on in Washington," Forsyth Commission Chairman Brian Tam said. "This has nothing at all to do with us."
Moody’s said its examination of local government finances stems from its July 13 decision to review the United States’ Aaa bond rating. The agency cited the possibility that Congress will not raise the country’s debt limit in time to prevent a short-term default on U.S. debts.
Competing plans were progressing through the House and Senate this weekend, but it could still be difficult for any plan to get through Congress and be signed by the president in time to avoid default.
Moody’s said the local governments would likely be indirectly affected by federal credit trouble.
When considering whether to downgrade credit ratings, Moody’s Senior Vice President Matt Jones said the agency would examine local governments’ financial resources, dependence on federal revenue and other factors.
Lower credit ratings for the affected local governments would be an about-face by the ratings agency. Moody’s renewed Cobb’s Aaa rating in March and Gwinnett’s last month. Both have had top ratings since 1997.
Forsyth’s credit rating has been raised twice in the past four years. Tam said Forsyth earned its high rating by being fiscally responsible and by maintaining a reserve fund balance of more than 20 percent.
Gwinnett County Commission Chairwoman Charlotte Nash said recent budget-balancing initiatives should be enough to convince rating analysts that the county can “maneuver through the potential fallout from national decisions.” She said Gwinnett has no plans to issue new debt, and the interest rates on its existing debts are fixed.
Cobb County Finance Director Jim Peherson said Cobb also can withstand financial scrutiny. He cited Cobb’s decision this week to approve a property tax increase to help balance its budget and cover expenses. And he said the county maintains 9 percent of its general fund as reserves.
“We think with the factors that Moody’s identified for review, our risk is low,” he said. “It’s our belief that a downgrade of the county’s debt rating will not occur.”
Officials with the Gwinnett school system could not be reached for comment.
Staff writers Janel Davis, Aileen Dodd and Patrick Fox contributed to this article.
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