WASHINGTON — Moody's Investors Service revised its outlook for the District of Columbia's approximately $2.2 billion of outstanding general obligation bonds to stable from negative, and affirmed the bonds' Aa2 rating.
Moody's had given the district a negative outlook in September 2011 as a result of uncertainty regarding D.C's unique exposure to federal government downsizing.
But Moody's believes the impact of federal budget cuts on the district's economy will not be as severe as the ratings agency had expected when it assigned the negative outlook. The budget cuts that began in the spring have had a moderate impact on the local economy, Moody's said its report Wednesday.
Additionally, the district's fundamental financial metrics have improved since September 2011, Moody's said. Its available fund balance and tax collections have increased, and the district is being conservative in a forecast of its tax-revenue growth. D.C. mitigated risk in its variable rate portfolio by refinancing puttable debt with direct bank loans and SIFMA index bonds. The district also has a strong pension position, particularly for a large city.
D.C. Mayor Vincent Gray welcomed the ratings revision.
"This decision by Moody's is yet one more piece of evidence that, under my administration, the district has shown a strong commitment not only to fiscal discipline and stability, but also to growing and diversifying our economy," he said in a statement.
Moody's noted that while the district is better positioned to handle federal downsizing than it was in 2011, it is still possible for federal budget reductions to have a large impact on D.C.'s economy, which could lead to a future negative outlook revision of rating change.
In addition to affirming its rating for the district's GO bonds, Moody's also affirmed the Aa3 rating for $207 million of D.C. certificates of participation and the A1 rating for $89 million of tax increment financing bonds.
