O.C. Gets Another Favorable Bond Rating

Orange County’s bankruptcy recovery won another Wall Street endorsement Friday, when a rating agency became the second in two months to give county bonds an investment-grade rating.

The action by Fitch IBCA Inc. to give the county’s outstanding pension fund bonds a BBB, or medium grade, rating follows a December decision by the more influential Moody’s Investor Service to raise the county’s investment rating for the first time since the 1994 financial collapse.

County officials said the ratings by the two agencies give the county new access to the credit market. But they said despite that access, they do not intend to borrow money in the next few years to pay for capital projects on hold.

Those projects, county Chief Executive Officer Jan Mittermeier said, will have to wait until the county has paid off more of its bankruptcy-related debt.

“We may not be on the market for a long time,” Mittermeier said. “By that time, we will have an investment-grade rating of A,” the top grade.

While bond experts said the agency’s decision does not fully erase the shadow of the bankruptcy, it does represent a significant vote of confidence in the county’s recovery efforts.

“It is impressive, there’s no question about it. They’ve done a good job,” said Zane Mann, publisher of California Municipal Bond Advisor.

“I don’t know if their library has money or their social services have money, but from a bond point of view everybody has to be pleased with what is happening in Orange County.”

The action does nothing in itself to ease the county’s tight budget picture. Dozens of projects--from jail construction to facilities maintenance--have been on hold since the financial collapse.

County officials estimate they would need $973 million to implement their 30 top-priority projects over the next 10 years. They expect funding available for those projects over the same period to be about $158 million.

“Some of these things are not going to get done at all because there simply isn’t going to be money for them,” Mittermeier said.

The county had hired Fitch at a cost of $20,000 to rate it for the first time. The investment rating remains below that of surrounding counties.