Decline in County Credit Rating Feared : Finance: In wake of crisis elsewhere, loss of confidence in local government bonds could make it more expensive to borrow.

Despite a conservative investment philosophy, Ventura County officials said Wednesday that the county’s credit rating could be harmed in the volatile bond market created by Orange County’s bankruptcy filing this week.

Even though the county’s bond rating is a stellar A+, a loss of confidence in local government bonds could lower that rating and make it more expensive to borrow money for public projects, Treasurer-Tax Collector Hal Pittman said.

“Our concern is that some investors or (bond) rating agencies will lump everybody in California in one group because one county had trouble,” Pittman said. “We don’t really know yet what’s going to happen. Do we worry about it? Yes.”

County chief administrator Richard Wittenberg said he believes that the credit ratings of all California counties will eventually suffer from the fallout of Orange County’s investment debacle. But he said he does not expect any major changes soon.

“It’s hard to judge how quickly the reverberations are going to occur,” he said. “I just tend to believe it’s going to be later down the road.”

One project that could be affected is the $51-million expansion of the Ventura County Medical Center. The Board of Supervisors last month authorized the issuance of so-called certificates of participation, which are similar to bonds, to pay for the project.

If the county’s credit rating is hurt, that could mean significant added costs, Pittman said. The certificates will not be issued for several months.

“We definitely don’t want any added costs,” Pittman said. “If there are, the board may want to take another look at it.”

Supervisor John K. Flynn said he did not know if extra costs would force a re-examination of the hospital project.

“I’m not ready to say what I would do right now,” he said. “It would depend on how much we were affected.”

Supervisor Maggie Kildee agreed.

“It’s a little early to be speculating,” she said. “But certainly there is a concern.”

The county’s short-term borrowing practices could also be affected by the Orange County bankruptcy, said Auditor-Controller Thomas Mahon. Each July, the county borrows about $75 million to carry it over until it collects property taxes in December.

Wittenberg noted that Orange County officials invited Ventura County to join their investment pool about four months ago.

“We were asked if we would be interested in joining, and we did not because it was too risky,” he said. “The number one issue for us is safety.”

Orange County officials, however, had a different philosophy. Managing an investment portfolio that included assets of 180 other public agencies, the county for years made high-risk investments that depended on stable or falling interest rates.

But the county lost its bet when interest rates suddenly began to climb a year ago. On Monday, veteran Orange County Treasurer Robert Citron resigned after disclosing that the investment fund had lost $1.5 billion.

Orange County’s investment practices should have been no surprise because California counties are so strapped for cash that they are constantly looking for new ways to raise money, Wittenberg said. He said the state Legislature’s raids on property taxes once reserved for local government has created a climate of desperation among many cities and counties.

“I can see how this occurred,” he said. “It’s very tempting for all counties to get involved in similar investment programs. Look, you had about 200 government entities that were a part of this.”

Barbara Coates, president of the California Assn. of County Treasurers and Tax Collectors, said she thinks Orange County’s investment practices are the exception and not the norm among the state’s 58 counties.

“My impression is that this is not a widespread problem,” she said.

Still, Coates said she also believes that the ratings of other California counties could be hurt in the future.

“I think so because there’s going to be quite a bit of concern about this happening somewhere else,” she said. “I think it’s unfair to have the fallout extend to other counties, because the majority of them have been following good investment practices, and they deserve the high ratings they have.”