Days before Standard and Poors downgraded the nations bond rating, sending Wall Street into a spiral, another credit rating agency slapped Alexandrias finances with a negative outlook because of ties to Washington.
Though Alexandria boasts recently reaffirmed triple-A credit ratings from both Standard and Poors and Moodys, the latter credit agency revealed August 4 it would take a harder look at the citys pocketbook.
The unprecedented decision is directly linked to the federal jobs and dollars spent in a city once part of the District, local officials say. They will make the case that the citys finances are sound with Moodys staff in the next 30 to 60 days.
We believe that when they come and look at our specifics in Alexandria there wont be any kind of issue on the negative outlook, said Laura Triggs, the citys acting chief financial officer. The rating agencies have been criticized in the past for not taking strong enough action soon enough.
The negative outlook means Moodys may downgrade Alexandrias credit rating in the months to come, but Triggs believes they will leave the city reassured by its financial policies and ability to manage debt. If the citys credit rating were downgraded, officials would see interest rates rise on future borrowing, costing taxpayers more on capital projects.
Vice Mayor Kerry Donley agrees with Triggs assessment. The city got its fiscal house in shape years ago, he said.
At this point, I dont think it means anything, Donley said. I think it is a cautionary note and I think we understand that the rating agencies are concerned with the overall federal debt crisis, but when you get right down to it, it really has no bearing on the City of Alexandria and it shouldnt.
Were the city preparing to borrow money while under the negative outlook designation, they might face higher interest rates, said Gerald Hanweck, a professor of finance at George Mason University.
If they need to have any more capital expenditures than theyre going to probably get an uptick in their interest rate, he said. The markets are going to look on this as, well, now theyre subject to federal government downsizing and this is going to effect their revenue. It could be riskier.
But Alexandria, which is in debt $480,720, wont borrow again until next year at the earliest, Triggs said. Because they took on debt before the Moodys designation, officials have the entire fiscal year to prove they can weather the ups and downs of federal spending.
Alexandria isnt alone in receiving the negative outlook label. Nearby Arlington, Fairfax and Loudoun counties, among other area municipalities, are undergoing review by Moodys. Hanweck expects any locality dependent on federal spending as a revenue generator to draw scrutiny.
Whether theyll be able to maintain their debt burden when and if the federal government slashes spending remains unclear, he said.
The question is and its a big question mark what are going to be the cuts and how are they going to make these cuts in federal spending, Hanweck said. If you have a base near your city or town or county, youre going to have very likely a reduction in federal spending. There are a lot of areas that are going to be impacted.
Alexandria is home to myriad government employees, the U.S. Patent and Trademark Office and other federal outposts, but since the federal entity is largely fee-based, Triggs expects it will be a point in Alexandrias favor when Moodys evaluates the citys fiscal standing.
More than anything, the label serves as a reminder city officials need to keep a close eye on capital projects in the years ahead, said City Councilman Frank Fannon.
Its imperative going forward that were able to separate our wants from our needs in what projects we take on here in the city, he said. Its definitely a concern and we dont want to pay any higher interest rates.