Despite the worst recession in seven decades, some counties’ finances are improving enough for Standard & Poor’s to expand their representation in the triple-A club.

In the past three years, Standard & Poor’s has given its coveted AAA  rating to an additional 20 counties, bringing the total number with that rating to 67 — still well below 5% of all rated counties that issue general obligation debt.

No gilt-edged county has been downgraded since Standard & Poor’s last compiled these results in January 2008, according to the report published Wednesday.

The upgrades reflect “the inherent economic, financial, and managerial strength of these counties, which have performed extremely well through the current recession,” analyst Karl Jacob wrote in the report.

Jacob said changes to rating criteria played only a minor role. He noted that 14 of the 20 counties given top ratings were one-notch upgrades, while the remaining six were first-time ratings.

Since Standard & Poor’s last compiled the numbers, each of the four national regions has experienced an increase in AAA ratings. The Southeast has 22 top-rated counties, versus 19 in the Midwest and 13 apiece in the Northeast and West-Southwest.

Virginia has eight AAA-rated counties — the most of any state.

Per-capita market value — a metric of all taxable property in a country, including residential, commercial and industrial properties, divided by population — actually increased since the January 2008 report.

“The numbers have held up or even gone up in many instances,” Jacob said, referring to property valuations. “That’s what we expect from a AAA. It’s not to say there isn’t stress during a recession, but they react well in all cycles.”

The median per-capita market value in the top-rated counties was $112,244 as of September 2010, up from $104,142 three years earlier.

“Given the length and breadth of the recession and its impact on property valuations, we believe the growth experienced by the AAA-rated counties speaks to the strength of their respective tax bases,” Jacob wrote.

Debt ratios have generally risen, but he said the increases are of less concern in light of the strong wealth and market-value characteristics of the top-rated counties.

The size and population of the counties isn’t a significant factor in the rating criteria. Standard & Poor’s noted that some of the top-rated counties have fewer than 100,000 residents, while others have as many as four million.

Bigger factors are financial management, a diverse economic base, and how quickly the governments pay down debt. The AAA-rated counties generally pay off debt at an above-average rate, the agency said, with about two-thirds of long-term debt retired within 10 years.

The average net debt per capita for the 67 counties is $2,816. Net debt among the counties ranges from $467 in Cobb County, Ga., to $7,301 in Williamson County, Texas.

The report is “a welcome bright spot among consistently negative news in the municipal market,” according to Natalie Cohen, research analyst at Wells Fargo Securities.

However, she said rating agencies continue to omit unfunded pension liabilities as part of their ratio analyses at all levels of government.

“Since counties are responsible for public welfare, it would be helpful to see more discussion of the effect of reduced federal Medicaid revenues,” she said.

Cohen noted that such revenues were elevated as part of the stimulus bill but will roll off this coming June 1.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.