Washington gets an upgrade to triple-A


Washington scored an upgrade to Aaa Friday.

Moody’s Investors Service upgraded the state’s general obligation bond rating from Aa1.

It’s the first Moody’s upgrade since 1997 for the state, which has never had a triple-A rating from Moody’s, according to a spokesman.

The upgrade to the highest investment grade rating affects roughly $18.4 billion in outstanding GOs, including bonds additionally secured by motor vehicle fuel taxes and toll revenues.

Washington State Treasurer Duane Davidson will have a triple-A rating to offer investors when his office sells general obligation bonds in September.

The outlook on the state’s debt and the school bond guarantee program is stable.

The state holds AA-plus ratings with a stable outlook from both Fitch Ratings and S&P Global Ratings.

The rating agency cited for the upgrade a significant increase in financial reserves even as the state increased funding for K-12 education in response to a state supreme court mandate, the exceptional growth of the state’s economy driven largely by the technology sector in the Seattle metro area, and the consequent diversification of the state’s economy lessening dependence on aircraft manufacturing by The Boeing Company.

The safety-related grounding of Boeing’s 737 MAX aircraft, while a credit negative for the company, has not impacted employment or state tax revenues to date and Moody’s wrote that a prolonged reduction of 737 MAX production, not currently foreseen, should not have a significant negative impact on the state.

“We expect the state will continue to address any budget gaps that emerge, as it has in the past,” analysts said.

Additional strengths for Washington include above-average wealth and income levels, and the state’s strong fiscal governance practices. While the state’s debt levels are above average, Moody’s wrote, they have been declining relative to the 50-state medians and the state’s debt and pension liabilities combined and fixed costs are comparable to medians.

In conjunction with the upgrade of the general obligation ratings, Moody’s upgraded the following related ratings:

  • The Washington State School Bond Guarantee Program that guarantees roughly $13.5 billion bonds to Aaa from Aa1.
  • The state’s certificates of participation with roughly $870 million outstanding to Aa1 from Aa2.
  • The TOP Lease Revenue Refunding Bonds, 2014 for the Washington State Office Building of roughly $35.8 million outstanding to Aa1 from Aa2.
  • The City of Aberdeen, Special Revenue Bonds, Series 2002 for the Stafford Creek Corrections Center Project with roughly $670,000 outstanding to Aa2 from Aa3.

Moody’s also affirmed the A2 rating on the state’s $517 million outstanding Federal Highway Grant Anticipation Revenue Bonds, Series 2012F & 2014C (GARVEE) for the State Route 520 Corridor Program.

The bump to Aaa also affects these upcoming bond sales: $471.9 million of Various Purpose General Obligation Bonds, Series 2020A; $228.8 million of Motor Vehicle Fuel Tax & Vehicle Related Fees General Obligation Bonds, Series 2020B; and $48.4 million of taxable General Obligation Bonds, Series 2020T; all scheduled for competitive sale Sept. 10, according to the office of State Treasurer Duane Davidson.

It also assigned an Aa1 rating to the state’s planned $101 million of Certificates of Participation, Series 2019D, scheduled for competitive sale Sept. 24.

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