Prince George’s County has maintained its AAA rating from Standard & Poor’s as it faces a lawsuit from union workers who have challenged mandatory furloughs imposed to cut costs.
The rating was assigned to $74 million of general obligation bonds the county issued Tuesday. The deal included $36.9 million of tax-exempt GOs bought by Lebenthal & Co. at a true interest cost of 2.22% and $36.9 million of taxable GOs bought by Stone & Youngberg LLC at a TIC of 4.73%.
Moody’s Investors Service rated the bonds Aa1 and Fitch Ratings rated them AA-plus. The three agencies affirmed their ratings for the underlying debt, while Fitch imposed a negative outlook.
Prince George’s lost a lawsuit in federal court in August brought by five unions and individuals who challenged 3.9% cut to annual salaries. The furloughs, which affect about 5,900 employees, were made to fill a $57 million gap for fiscal 2009.
Unions claimed that the county sacrificed the workers’ full pay to maintain reserve accounts needed to protect the triple-A rating. The county has said it will appeal the ruling and warned of “massive layoffs” if the furloughs are overturned.
The county has set aside $11 million in its budget as a liability related to the case despite the appeal, Moody’s said. The county’s fiscal 2010 budget includes additional furloughs.
Standard & Poor’s does not mention the lawsuit in its rating report. Analysts said the county’s reserve’s “remain strong,” and that, historically, Prince George’s has maintained reserves of at least 7% of the general fund budget.