Moody's gives new Fairfax County bond offering a "negative" outlook.

While keeping its general Aaa bond Rating, Moody's announced yesterday that is is assigning a "negative" outlook to that rating for an upcoming Fairfax County bond issuance.  Here is Moody's rationale as published on its website:

The negative outlook reflects recent declines in the county's available reserves to levels that are below-average when compared to other Aaa-rated entities. In addition, the county's financial position will remain challenged going forward as management addresses upcoming budget gaps after reducing expenditures. While future tax base growth is expected to help offset these projected budget gaps, further budgetary pressures are likely to result from additional pension costs as the county increases its funding to meet the annual required contribution, which was underfunded by $48.3 million in fiscal 2013. Moody's views this underfunding as a budgetary weakness and any inability to increase funding to meet the Annual Required Contribution (ARC) could result in additional negative pressure. Furthermore, any additional draws on the county's reserve levels, both within and outside the General Fund, could also result in negative credit pressure.

Fairfax County has denounced the decision in this press release.

The "negative' outlook may require Fairfax County to be even more careful in its budgeting and taxing.  It could lead to reduced County services in non-priority areas (e.g.--public libraries, parks & recreation) as well as higher property tax rates absent an unlikely strong real estate rebound in both the commercial and residential sectors.