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Montco gains top credit rating as strong economy boosts tax collections

"Disciplined fiscal management" led the largest Philadelphia suburban county out of its "poor financial situation"

Chair of the Montgomery County Board of Commissioners Val Arkoosh.
Chair of the Montgomery County Board of Commissioners Val Arkoosh.Read moreSydney Schaefer / Staff Photographer

Moody's Investors Service, New York, has boosted Montgomery County's bond rating by a notch, to Aaa, its highest mark, pulling even with wealthy neighboring Chester County.

The rating, reflects the wealthy county's "strong, dynamic, growing tax base" — and also its "very modest debt and pension burden, and overall improved financial profile," including "healthy surpluses" and cash reserves in the county budget, compared to past years, wrote Moody's lead analyst Nicolanne Serrano, in a report to subscribers.

High-rated bonds typically sell at lower interest rates, saving money for borrowers and, in this case, easing pressure on county property taxes.

Montgomery County enjoys the advantage of relative wealth, faster growth, and fewer legacy costs compared to its neighbor, Philadelphia. For example:

  1. Montgomery County has been setting aside $9 million a year to keep its pension fund solvent, reflecting its small workforce, modest pensions, and few retirees compared to Philadelphia.

  2. Philadelphia, with roughly double Montgomery County's population, pays more than $600 million a year to keep future payments flowing to retired police, City Council members, and other civil servants, who outnumber working city employees.

Moody's boosted the rate a notch in advance of Montgomery County's planned sale of $44 million in General Obligation notes. Although the sale will help the county refund debt at lower interest rates, county officials don't expect any net savings, because they are at the same time paying an amount similar to the savings to terminate unfavorable interest-rate swaps that had been costing the county money.

Val Arkoosh, chair of the elected county board of commissioners, took credit for Moody's applause, self-praising what she called "disciplined fiscal management designed to lead the county out of the poor financial situation that was inherited by this administration in 2012," when voters elected a Democratic majority in county government for the first time in living memory.

Specifically, Arkoosh noted, "fund reserves increased 70 percent over the past four years to $84 million; the general fund finished with four consecutive surplus years."

Arkoosh says Montgomery County's tax rate is the lowest in Philadelphia's Pennsylvania suburbs. In most suburbs, school taxes are far higher than county or municipal taxes.