WASHINGTON — Triple-A rated Montgomery County, Md., the state’s most populous county, on Monday was put on review for a possible downgrade by Moody’s Investors Service, affecting $1.8 billion of outstanding debt.

The placement on Moody’s watch list stems from falling income tax revenues and the likelihood that the county will use “a significant portion” of its general fund and revenue stabilization fund revenues to plug its fiscal 2010 gap, Moody’s analysts said in a credit report.

Moody’s possible downgrade watch also applies to the county’s certificates of participation, taxable limited obligation certificates, lease revenue bonds, and general obligation debt issued through the Maryland-National Parks and Planning Commission.

The action comes as the county plans to competitively sell  $30.4 million of Series A taxable limited obligation certificates for housing today and $22.9 million of COPs for a public transportation equipment acquisition on Wednesday.

Both series are rated Aa1 by Moody’s and AA-plus by Standard & Poor’s. Fitch Ratings has a AA rating for the taxable certificates and a AA-plus rating for the tax-exempt COPs.

The county is expected to end fiscal 2010 with an “extremely narrow” $23.5 million, or 0.9%, of general fund revenue available for reserves, Moody’s said.

The county has a 1990 charter amendment that caps property tax revenues to the prior year’s total revenues plus inflation and revenues received from construction fees, Moody’s said. To override the restriction, unanimous approval from the county council is needed. The county has exercised this option in four of the past 10 years, but its proposed fiscal 2011 budget request does not propose an override, Moody’s said. The council’s past willingness to override the charter tax limit “has been a positive credit factor,” the rating agency said.

Montgomery last sold general obligation bonds in November. The county competitively sold $232 million of GO Build America Bonds to JPMorgan at a true interest cost of 4.88%, and $160.8 million of GO tax-exempt bonds to Morgan Stanley at a true interest cost of 2.65%, according to Thomson Reuters. The bonds were rated triple-A by Moody’s, Standard & Poor’s, and Fitch.

Last week, Anne Arundel County, Md., was downgraded by Fitch to AA from AA-plus, stemming from trouble in the housing sector. Moody’s placed a negative outlook on the county’s Aa1 ratings. Standard & Poor’s rated the credit AAA.

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