As tremors from the recent budget battle on Capitol Hill continue to afflict local economies across the country, Prince George’s County is among those facing further financial uncertainty with possible risks to its credit rating.
Moody’s Investors Service, one of the top three credit rating agencies along with Standard & Poor’s and Fitch Ratings, has placed the county’s AAA credit rating on negative outlook, indicating an increased risk of downgrade over the next one to two years. A downgrade of Prince George’s County could have ripple effects on county projects within College Park, such as those that would repair sidewalks or roads within the city.
“Any sort of physical projects [could be affected],” said County Councilman Eric Olson (D-College Park). “I’m not going to say things won’t get done, but that it just might be difficult.”
Mayor Andy Fellows said previous encounters with tough economic climates have proven College Park’s resilience.
“College Park has been operating under a really challenging economic context for quite some time,” Fellows said. “We’ve been relatively able to ride through the economic storm so far without so much negative impact.”
Moody’s placed Prince George’s County under review for possible downgrade while the federal government grappled with its own economic uncertainty leading up to the Aug. 2 deadline to raise the debt ceiling. On Aug. 5, S&P downgraded the U.S.’ credit rating from AAA, the top rating, to AA+.
According to David Jacobson, a spokesman for Moody’s, the agency examined AAA-rated localities that would be especially vulnerable should the country be downgraded. Prince George’s County was one of 162 localities placed under review.
“Maryland and Virginia had quite a few because they’re so closely tied [to the federal government] both with federal jobs and federal procurement contracts to Washington,” Jacobson said.
Shortly following the budget compromise reached just before the Aug. 2 deadline, while the county avoided a downgrade from Moody’s, the agency placed the county on negative outlook, reflecting an increased chance of a downgrade at a later date.
To finance projects on the county level, Prince George’s County issues bonds to investors. Should a downgrade occur, payments to investors would become more expensive in conjunction with rising interest rates characteristic of a credit downgrade.
“When we have to pay more on interest rates when we build or do things that we have to sell bonds for, then we spend more taxpayer money on it,” said Scott Peterson, spokesman for Prince George’s County Executive Rushern Baker (D).
Peterson added that 25 percent of the federal workforce resides in the county, which is home to many federally funded operations.
But some city officials said they were not overly concerned College Park itself would be directly affected by the county’s potential credit problems.
“I don’t see a gigantic impact on the city based on whatever may be happening at the county level,” said Stephen Groh, the city’s finance director.
Prince George’s County still has top-level credit ratings from all three major credit rating agencies.
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