Thursday, July 28, 2011

Debt Ceiling Crisis Reaches Richardson

Last week, in reporting on Richardson's budget retreat, I warned:
"The city proudly points to its Aaa/AAA credit ratings by Moody's and S&P as a factor in keeping its debt service costs low. A dark note that was not considered during the budget retreat: Moody's says it will downgrade at least 7,000 top-rated municipal credit ratings if the U.S. loses its own AAA grade. What would be the consequences to Richardson in that case? I didn't get the impression that Richardson has contingency plans. Let's hope Washington comes to its senses and raises the federal debt ceiling before the federal government defaults."
Well, today, the Congress seems just as belligerent as ever about reaching a compromise over raising the debt ceiling. And today, we moved one step closer to that downgrade of Richardson's own debt. After the jump, the details.

According to the Texas Tribune,
"Moody's Investor Service put a total of 177 public finance issuers 'under review for possible downgrade' Thursday in anticipation of what might happen with the federal government. ... The list includes several Texas borrowers:
  • Alamo Community College District
  • Bexar County
  • Dallas County
  • City of Richardson
  • City of San Antonio
  • San Antonio River Authority
  • Tarrant County
  • Tarrant County Hospital District
  • Travis County"
I sure would feel more comfortable if the Richardson City Council had said something, anything, about this possibility when they were discussing next year's budget. Even if they are counting on John Boehner and Harry Reid pulling a rabbit out of the hat at the last minute and saving Richardson's debt financing costs, doesn't prudent risk management demand a contingency plan?

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