Recession’s reach hits affluent Maryland county

WASHINGTON (Reuters) – The U.S. economic recession that began in 2007 spared few local governments, and two years after the fiscal firestorm officially ended it continues to hurt even the most affluent areas that are usually shielded from major downturns.

Maryland’s prosperous Anne Arundel County, only 13 miles from Washington, D.C., on Monday suffered a second big blow after it saw its outlook revised to negative from stable by Standard & Poor’s Rating Service.

In March 2010, Fitch Ratings cut the county’s outstanding general obligation bond rating to AA from AA-plus.

Moody’s Investors Services assigns a rating of Aa1 to the county’s debt.

“The outlook revision is based on a continued deterioration in the county’s financial position,” said S&P credit analyst Kate Hackett in a statement. S&P raised Anne Arundel’s rating to AAA from AA-plus in March 2007.

The county is more affluent than many of its peers, mostly due to the steady federal employment Washington provides, along with jobs from the state capital and naval installations in its major city, Annapolis. Its unemployment rate is 6.8 percent, much lower than neighboring Baltimore County’s 8.2 percent.

The housing bust, financial crisis and recession, though, ravaged most local governments’ revenues, forcing almost all cities and counties to hike taxes and cut services. They also turned to one-time federal aid while tapping reserves.

Anne Arundel was no exception.

It has withdrawn significant amounts of money from its reserves and used nonrecurring revenues to balance its budget over the last two years, S&P said. Some analysts consider a reliance on nonrecurring revenues a sign that a local government may struggle to balance future budgets.

County leaders, though, mostly shrugged off the outlook change, saying the negative factors S&P cited are common for municipal entities during an economic downturn.

Instead, they heralded that S&P gave its top rating of AAA to the county, which will sell more than $175 million of general obligation bonds in two competitive deals on Wednesday.

“This administration has reduced the size of government while not increasing taxes on property or income,” County Executive John Leopold said in a statement. “An AAA rating by the Wall Street firms shows a confidence that our economy is rebounding and we are weathering the fiscal storm.”

Areas in Virginia and Maryland like Anne Arundel were spared the early effects of the recession because few federal employees and contractors were laid off.

Residents of the county tend to be more prosperous than the state and the rest of the country, too. In 2008, their median household income was $82,616, compared to the Maryland median income of $70,482. According to the U.S. Census, the median income in the entire nation was $50,112.

S&P also noted Anne Arundel, with a population of more than half a million people, had average annual increases of 13.5 percent in property tax revenues since 2006, despite a national real estate downturn.

Earlier this month, the National Association of Counties said counties are still reeling from the recession — the longest and deepest downturn since the Great Depression — and are cutting staff, delaying projects and tapping reserves.

(Reporting by Lisa Lambert; Editing by Leslie Adler and Diane Craft)

Recession’s reach hits affluent Maryland county