Fitch Ratings warned investors this week about potential damage to the county's AAA bond rating because so much of the county's cash is tied up in long-term investments.
Fitch said the decision to issue a "negative rating watch" for
A credit downgrade could have real financial consequences by increasing the county's interest rates when it borrows money to pay for roads, parks and other major projects. The AAA rating helps the county borrow at incredibly low rates, in the neighborhood of 2.3 percent.
In a news release, Fitch said the county faces "thin cash balances" through the summer. The agency also noted that County Treasurer
"The Negative Watch reflects the county's substantially reduced cash flow margin due to increased investments in long-term securities," Fitch said. "The shortfalls developed with a deviation from past investment practices by the current and past county treasurers."
That analysis echoes criticism from the
The two switched jobs after Ortiz won election, with Padilla staying on as investment officer. Padilla left the county in December, however, to focus on his bid for state treasurer.
Ortiz, meanwhile, faces a recall campaign. A state district judge last month agreed to allow signature-gathering to begin after finding "substantial evidence or probable cause to believe that
Ortiz said Wednesday that he had no comment "at this point" on the Fitch announcement.
The AAA rating, he said, is "tough to get and easy to lose." But the county has strong reserves -- about five months' worth of operating expenses -- and has managed its budget well, Zdunek said.
"My hope is that when they're reviewing the county and taking a look at the reasons for our current fiscal crisis ... that they'll also look at what we've done to address it," Johnson said.
Fitch's analysis wasn't entirely negative. The agency noted that the county has hired an independent investment adviser to help restructure the portfolio and that a new investment policy adopted by commissioners imposes tighter restrictions on long-term investments.
The county's debt levels are moderate, Fitch said, and are being paid off at a "rapid" rate. The agency also noted that the county has plenty of reserves.
Fitch said its ratings apply to about
"The county's operating performance remains strong, reflected in the maintenance of high, albeit illiquid, unrestricted fund balances," Fitch said.
The agency added: "The Negative Rating Watch reflects a heightened probability of a downgrade over the next few months. While it appears the county has taken swift corrective action, Fitch is assessing the county's cash management practices' impact on the overall credit profile."
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