The District of Columbia is saddled with slowed jobs and economic growth, but has still managed to score a boost in five credit ratings from Moody’s Ratings.
“Moody’s upgrades are a testament to the district’s solid financial management and strong economic fundamentals,” said Chief Financial Officer Glen Lee.
“We are extremely pleased by this recognition of the district’s strong governance and financial strength.”
Christopher Mobley
The CFO’s announcement this week comes in response to Moody’s issuing improved marks on five different special tax bonds.
Income Tax Secured Revenue Bonds were upgraded to Aaa from Aa1, with an outstanding balance of $5.9 billion.
Washington Convention and Sports Authority Senior Lien Dedicated Tax Revenue Bonds, which are supported by the city’s active tourism stream, have an outstanding balance of $366 million and were upgraded to Aa2 from Aa3.
Federal Highway Grant Anticipation Revenue Bonds were upgraded to Aa3 from A1 and A2, with a total of $236 million outstanding.
Senior and Subordinate Ballpark Revenue Bonds went to Aa1 from A1 and A2. They account for $149 million of outstanding bonds and are supported by corporate income tax surcharges and utility taxes.
Deed Tax Revenue Bonds received an upgrade to Aa2 from A1, with $29 million of outstanding bonds, despite the volatility of the pledged revenue stream.
Per Moody’s analysis, “The credit profile of the District of Columbia (Aaa negative) is characterized by its strong economy and finances, low leverage and very strong governance.”
“The district’s high-wage knowledge and services-based economy will continue to expand. Strong growth in sales tax revenue bolstered by tourism and the hospitality industry is alleviating slower revenue growth caused by commercial property challenges, namely on property taxes.”
Moody’s optimism is backed up by Washington’s four-year revenue estimate that was released at the end of September showing positive movement.
For 2024, the numbers received an upward revision of $72.7 million based on, “the latest revenue collections data, which show higher than expected receipts from sales, real property, and unincorporated business taxes, as well as nontax sources.”
The CFO’s office tempered the good news by highlighting weaker job and economic growth in Washington as compared to national numbers.
Washington’s downtown office market is still reeling from the work from home movement which has dinged tax receipts, but it too showed a spark of good news.
Per the CFO’s office, “Outlook for the downtown office market has not changed, but the impact on assessments from appeals was less than estimated. Hence, revenue was better than expected.”
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“The bonds were issued with an aggregate, all-in true interest cost of 3.43%, and the refunding components of the transaction resulted in gross debt service savings of roughly $50.7 million,” the CFO’s office said in a statement.
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The district’s finances are required by law to be governed by four-year budgets that must remain in balance.
Washington is subject to Congressional oversight and cannot levy taxes on commercial property owned by the federal government, which accounts for roughly 40% of the commercial real estate. It’s also restricted from taxing the incomes of nonresidents who work in the city.