Moody's Investors Service said it has upgraded the District of Columbia's $2.8 billion of general obligation bonds to Aa1 from Aa2.
Concurrently, it upgraded $43.5 million of rated tax increment financing bonds to Aa3 from A1.
The general obligation upgrade to Aa1 reflects a variety of strong credit features and a degree of resilience in the District's economy to federal downsizing.
The District's fund balances have continued to strengthen in recent years and are on a trajectory to continue to increase in the next several years. The District's pension and other-post employment (OPEB) liabilities are low compared to most large local governments.
That provides the District considerable financial flexibility and will continue to distinguish its credit profile going forward as other governments dedicate an increasing portion of their budgets to pensions and OPEB.
Financial governance is particularly strong, including multi-year financial plans, debt affordability analysis and mandated reserves, which provide a robust framework for the District to maintain a healthy financial position going forward.
Changes in federal employment and spending still pose a challenge to the District, but federal downsizing has had only a moderate impact on the District's economy.
This resilience reflects the nature of the District's core federal employment and reflects the changing nature of the city itself as a desirable location to live and work in. Indeed, population has increased to its highest level since 1978. Those strengths are offset against the District's high bonded debt burden-reflecting its combined city, school district, county and state financing responsibilities.
The upgrade of the TIF ratings reflects the breadth and strength of the pledged real property and sales tax increment revenues collected in the District's central business core. Based on the size of that portion of the District's tax base, the TIF ratings are linked to its general obligation rating.
