AAA Bond Ratings: Hard to Earn, Easy to Lose
Earlier today, bloggers at the Club for Growth included a link to a USA Today article, which noted that "As company priorities shift, fewer get AAA bond rating." The USA Today article identifed the current 8 companies with AAA bond ratings as well as several reasons for the declining number of AAA-rated companies. The paper noted that the "AAA club" might soon be down to 7 members, and is a significant decrease from 1980 to 1983 when 32 "non-financial companies carried" this "gold standard" debt rating. The Arlington County Board rightly trumpets the county's AAA-ratings. However, as ACTA has pointed out on numerous occasions, the ratings are due more to Arlington's strong economy, tax base, and the apparent willingness of Arlington's citizens to pay higher taxes and take on more debt than the financial management of the Board and county staff. This view is supported by our reading of the two 2004 rating agency reports (Fitch's and Moody's -- Adobe required) posted on the county's website. One of the reasons listed in the USA Today article is that companies are "more toleran(t) of risk. As noted in last night's entry about the increasing cost of Washington-Lee High School, it seems that willingness to tolerate more risk has seeped over to local government management. As USA Today also noted, "bad things happen to good companies."