The Business Recorder posted today that Moody’s Investors Service downgraded its rating on $359 million of Contra Costa County, California 2001 and 2003 pension obligation bonds to A1 from Aa3, noting concerns about the county’s inability to raise taxes for debt service.
“The downgrade to the pension obligation bonds reflects the nature of this type of debt which is unsecured and paid from any of the county’s funds, pressured by factors which affect financial performance such as steeply rising service costs,” Moody’s said in a statement.
“The pension obligation bonds are an unconditional county obligation payable from any legally available funds,” Moody’s added. “However, the county does not have the ability or authority to raise taxes to meet debt service.”
Two things… OK, three. 1. Downgrades mean higher interest rates to service the debt; more money the County don’t got. 2. Please understand, this is just one example of how public pension debt will take us all down the path to bankruptcy (preferred) or receivership run from Sacramento (which won’t fix anything). 3. Since the County already has a captive co-signor (taxpayers), don’t be surprised when the County Supervisors start scrounging for new taxes (sales, user fees, etc) to get around that “(In)ability or authority to raise taxes to meet debt service.”