The Burden of MOSA
I was intrigued by section line from the story on the challenge to MOSA GAT fee by the counties (Recorder story here):
County board Chairman John Thomas said he was unconcerned with the credit watch and doesn’t expect the county to be penalized financially for standing up for itself.
“I see this as nothing more than empty saber rattling,” Thomas said. “That $1 million shortfall was shown to be bogus. They’re just shooting themselves in the foot.”
Umm, it is actually non-empty saber rattling as S&P ratings matter to the cost of debt for future bonding and depending upon bond issue, may even impact current costs of bonds and debt. Plus S&P would not be the ones saber rattling as they are strictly a ratings agency ; the bond holders would be the ones saber rattling.
I’m no fan of MOSA and would look for any way to terminate and end our deal with MOSA but to characterize this as above is simply wrong or perhaps poorly articulated. Let’s be honest: MOSA has significant financial impacts in a myriad of ways; wishing them away doesn’t make the financial costs disappear.
In fact, the story does a nice job of explaining the underlying significance of S&P to put the quotes above in context:
Standard & Poor’s is widely regarded as one of two accepted bond rating authorities – along with Moody’s – that evaluate the creditworthiness of businesses and governments. Bowerman said the credit watch essentially is a warning by Standard & Poor’s that unless the dispute is resolved, it will lower Montgomery County’s bond rating from its current “A.”
Bowerman said the result of such a move could be more difficulty in finding takers for its bonds, added costs for issuing those bonds or even being unable to take on any long-term debt and having to turn to more expensive short-term financing.