King County Executive Ron Sims delivered his 2006 Budget Address before the Council this afternoon, and one little tidbit that immediately jumps off the page is the news that Standard & Poor’s has upgraded the county’s general obligation bond rating to AAA. For the first time in its history, the county now enjoys the highest rating of financial stability awarded by all three major ratings agencies… and one of the highest municipal ratings in the nation.
In announcing the upgrade last week, S&P lauded the county’s “exceptional financial management through the spectrum of economic climates.”
“From 2000 to 2005, King County experienced economic fluctuation; it was also during this time period that a significant statewide property tax limitation initiative was introduced,” said Standard & Poor’s credit analyst Gabriel Petek. “In the midst of these challenges, the county has effectively achieved ongoing structural budget balance while continuing to incrementally increase its reserve levels in recognition of the need for financial cushion in an environment of limited revenue flexibility,” he added. “Moreover, the county has taken steps to address potential challenges to its very strong fiscal position. For instance, the county is facilitating the incorporation or annexation of unincorporated-but-urban areas within its limits–areas that are effectively subsidized by county services under the current regime.”
A structural challenge the county has grappled with is the pressure that Initiative-747 (I-747) places on county finances. In 2001, Washington voters approved I-747, which limits the growth of tax revenues to 101% of the previous year’s revenues, plus newly constructed development. Early in the current decade, this and other limits on revenue growth combined with regular growth in expenditures to produce a structural budget gap between recurring revenues and expenses. In response to the loss of tax revenues from I-747, the county budgets conservatively by assuming low growth in sales tax revenues and by reducing expenditures. In addition, management and staff have been creative in developing ways to make operations self-supporting and by contributing to projects that will provide increases in revenues other than property taxes.
According to an article in The Bond Buyer Online, King County joins Seattle as the only other municipality or school district in the state to achieve an underlying AAA rating from S&P… an impressive accomplishment by any measure.
Challenger David Irons says he wants to run the county more like a business, touting his exaggerated resume as preparation for running a government larger than that of thirteen states. But when voters go to the polls to choose who’s best qualified to manage the county’s $3.4 billion budget, I’m guessing they’ll stick with Sims, the executive who has led King County to the highest bond ratings in its history, at a time when many other municipalities around the state are bordering on bankruptcy. While Irons and his GOP allies are reduced to rehashing the 2004 election contest in a trumped up effort to cast doubt on Sims’ managerial skills, the financial experts — S&P, Moody’s and Fitch — all give Sims the highest grade possible on the executive’s most important management responsibility of all… drafting and executing the county budget.
If Sims had achieved these AAA ratings during an economic boom, today’s news would be a footnote rather than a headline. But by setting the county on such a sound financial footing at a time when revenues were shrinking and costs were skyrocketing, Sims deserves just as much credit as he’s earned for the county.