WASHINGTON — Montgomery County, Md.’s projected $401 million budget shortfall for fiscal 2009 is not expected to affect its triple-A credit rating and stable outlook, rating agency analysts said yesterday. “We think they still have an awful lot of financial flexibility,” said Barbara Ruth Rosenberg, an analyst with Fitch Ratings. She noted that the county had an unreserved general fund balance in 2006 of $282 million, which amounted to 11.6% of spending. Also in the county’s favor is its fiscal 2009 July 1 start date, which leaves county leaders plenty of time to explore and implement options for closing the gap, according to Fitch analyst Douglas Offerman.“The benefit of bringing this issue up now is that the county’s financial managers have the time to develop some solutions, build some consensus, and hopefully tackle the problem so that they are not going to the new fiscal year facing a crisis,” Offerman said.Robin Prunty, an analyst with Standard & Poor’s, said considering the county is only halfway through fiscal 2008 and is already looking ahead to the next fiscal year is evidence that its leaders are serious about addressing the issue.“Looking at a budget gap for next year and beginning to focus their attention on it this early, we would view as a credit positive, good budget management,” Prunty said.She said it is not unusual for local governments who plan more than a year in advance to identify budget gaps that need to be managed.“We have a AAA rating on the county and it is probably one of our strongest,” Prunty said, adding that the county has a good financial management team. “We would be more concerned if it was a current-year [budget] gap and there was no action to close [it]. Those would be things that would give us pause for concern,” she said.Alicia Stephens, an analyst with Moody’s Investors Service, echoed the other credit experts’ comments.“We certainly would not being in a position to take any rating action at this time based on this information,” she said. “In some ways, it is not a surprise that they are recognizing this challenge up front for fiscal 2009, because it was essentially disclosed in their multiyear planning.”“We would look to see and plan to monitor exactly what revenue enhancements and expenditure controls the county would utilize,” Stephens said. The projected $401 million budget gap is due in part to an anticipated reduction of income from transfer and recordation taxes associated with home sales, which account for a significant portion of county income, according to Neil H. Greenberger, a spokesman for the County Council. Other expected revenue declines include a possible slump in fees associated with new development. Greenberger said that while county Executive Isiah Leggett and the council are exploring ways to cut spending and may consider raising tax and fees, if necessary, “right now it is too early to say what is going to be needed.”
