S&P Downgrades County Investment Pool

Solano County Treasurer Tax Collector County Clerk Charles Lomeli announced today (Aug. 8) that Standard and Poor’s has downgraded the County Investment Pool from AAAf to AAf, citing exposure to U.S. sovereign debt.

The County Investment Pool maintains its S1 volatility rating and was removed from CreditWatch Negative, which the credit agency placed on the pool in mid-July as concerns over the impasse on the debt ceiling mounted.

“No significant changes to the County’s investment policy are expected as a result of the downgrade.  The County will continue to monitor the situation and take appropriate actions to maintain the safety of these publically entrusted funds,” Lomeli said.

The County Investment Pool’s exposure to U.S. sovereign debt became a concern on Friday, Aug. 5, when Standard & Poor’s downgraded the United States government from AAA to AA+. In addition, the credit rating agency downgraded the Federal Reserve Bank of New York and the Federal Reserve System. On Monday, Aug. 8 Standard and Poor’s followed up by downgrading a number of U.S. government-related entities, including mortgage giants Fannie Mae, Freddie Mac and the Federal Home Loan Bank.

Standard and Poor’s actions were based on their opinion “that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.  More broadly, the downgrade reflects the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than envisioned when we assigned a negative outlook to the rating on April 18, 2011.”

Prior to today’s actions, the County Investment Pool was rated AAAf, which is the highest rating issued by the credit rating agency Standard and Poor’s.  A reduction in the credit rating could raise the interest rate the pool participants pay on any bonds they issue in the future.

The Solano County Investment pool is primarily composed of United States government and government entity-related debt. California laws place very strict limitations on the investment options available to local jurisdictions.  Historically, government securities have been optimal investments to maintain the conservative investment strategies required by law. 

The County Investment Pool is made up of funds from more than 80 units of local government, including the County, school districts and various special districts.

Info: Solano County press release

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