Moody’s has assigned an Aa2 rating to Lancaster County’s upcoming bond issue, offering a strongly positive assessment of the county’s economy and county government’s financial management.
The credit agency reaffirmed its Aa2 rating of the county itself, saying the area’s growing economy and county government’s financial prudence “will assure a healthy balance sheet for the foreseeable future.” Aa2 is Moody’s third highest rating.
Lancaster County is an “economic outperformer in Pennsylvania,” Moody’s said, with household income at 112% of the U.S. median. While the county is about to launch an expensive undertaking — the new correctional facility — its “conscientious fiscal management” will protect its balance sheet, Moody’s said.
Specifically, the agency cited Lancaster County having paid down more than $100 million in debt. Commissioners Josh Parsons and Ray D’Agostino have said on multiple occasions that shrinking the county’s balance sheet would be well received by financial markets and put the county in a good position to take on the prison project.
The Moody’s rating is a reflection of that effort, and of the county’s commitment “to be good stewards of taxpayer dollars,” D’Agostino said in a statement.
The county’s population and economy have grown, with market property values rising 42% since 2020, Moody’s said. While property taxes are based on assessed value, market value, new development does increase the county’s tax base.
The bond issue that Moody’s rated is a refinancing of previous debt issued between 2016 and 2023. In June, the county commissioners authorized the issuance of up to $30 million; the actual amount is expected to be $24.9 million.
Refinancing will allow the county to reduce its annual debt service by about $3 million a year over the next few years, creating more headroom for the debt service it will incur when it issues bonds for building the prison.
The tradeoff is somewhat higher annual payments in the 2030s, as it is refinancing debt that otherwise would have been paid off by then.
The refinancing will yield $21 million, which can be placed in capital reserves and earn interest. When the correctional facility bonds are issued, the money can be deployed to cover some of the principal and interest on that borrowing, Ken Phillips, a managing director at the financial services firm Raymond James, said at a presentation earlier this year.
The refinancing is to be completed later this summer. The deadline is Nov. 1, the original bonds’ redemption date.
A second round of refinancing along similar lines is planned early next year.
