WASHINGTON – Standard & Poor’s has boosted the District of Columbia’s credit rating, signaling confidence in the District’s financial health despite the looming unknowns of sequestration.
S&P, one of several Wall Street credit rating agencies, announced Thursday that it had raised the District’s rating for general obligation bonds from A+ to AA-. The change allows the District to borrow money more cheaply and comes after more than a decade of fiscal struggles for the District, which once had junk-bond status.
“This decision by Standard & Poor’s is an affirmation of my administration’s commitment to fiscal discipline and stability and our hard work promoting economic development and diversifying the District’s economy,” Mayor Vincent Gray said in a statement. “I’m pleased that our policies are working to better our fiscal health not only now, but also for future generations of District residents.”
When Gray took office in 2011, the District’s rainy day reserves had been spent down to balance annual budgets. Gray said that he has presented, and the District Council has passed, budgets that spent only what revenue D.C. brought in.
The city ended last year with a $417 million surplus. The city was placed under federal receivership in 1995 after years of financial mismanagement. Real estate growth and an influx of young professionals have helped broaden the District’s tax base since then.
S&P cited modest growth in the city’s real estate and income tax base as one contributing factor to the rating change. S&P also noted the District is remaining below a 12 percent debt cap, which limits how much of the general fund can be used to repay debt.
S&P said it considers the District’s financial outlook as stable.
“District revenue forecasts further indicate growth through fiscal 2017, although we expect ongoing federal consolidation to drag down growth,” S&P said in a statement. “In light of the uncertainty about how some of the sequester cuts could be implemented and the exact impacts on the district’s future budgets and economic activity, we believe a further upgrade is limited at this time.”