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Hillsborough County placed on Moody's watch for possible ratings downgrade

Hillsborough County is one of 162 local governments nationwide whose Aaa credit rating has been placed under review for possible downgrade by Moody's Investors Service amid the growing national debt crisis.

"This is fallout from the possible downgrade of the federal government," Hillsborough County administrator Mike Merrill said, stressing that the review is not due to any irresponsibility on the part of the county.

Indeed, Moody's said its action Thursday was directly tied to its July 13 decision to place the country's Aaa government bond rating under review for a downgrade as it inches closer to a possible default if the national debt ceiling is not raised by Tuesday.

"The ratings of these local governments, particularly those with a high economic dependence on federal activity, would be vulnerable to a downgrade of the U.S. government," Moody's senior vice president Matt Jones said. Among the factors considered are how much a local government relies on capital markets, its dependence on federal revenue, its sensitivity to changes in the broader economy and other financial resources it has available.

It's unknown what effect a downgrade could have on the county's credit rating, Merrill said. "From the investors' points of view, this is an entirely different event" than a normal downgrade, he said. "It's a systemwide adjustment."

A bond issuer like a local a government could face higher borrowing costs if it's viewed as a higher credit risk.

In an e-mail to county commissioners Friday, Bonnie Wise, the county's chief financial administrator, said Moody's will review each of the Aaa-rated governments to determine whether a downgrade is warranted.

The county plans to work closely with Moody's to "ensure that its Aaa rating is maintained," she said.

All told, Moody's put under review the Aaa ratings of 177 public entities affecting a combined $69 billion of outstanding debt. In addition to the 162 governments in 31 states, 14 housing finance programs and the University of Washington were affected. Only two other Florida governments — Broward and Palm Beach counties — are on the list.

Earlier, Moody's had put the Aaa ratings of five states under review: Maryland, New Mexico, South Carolina, Tennessee and Virginia.

Hillsborough County placed on Moody's watch for possible ratings downgrade 07/29/11 [Last modified: Friday, July 29, 2011 10:24pm]
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