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Washington DC’s Rating Outlook Lowered to Negative by Moody’s Days After US Cut

2023-11-13 21:05
The District of Columbia had its outlook revised to negative from stable by Moody’s Investors Service, just days
Washington DC’s Rating Outlook Lowered to Negative by Moody’s Days After US Cut

The District of Columbia had its outlook revised to negative from stable by Moody’s Investors Service, just days after the credit-rating company did the same to the US.

“The revision of DC’s outlook to negative reflects the District’s unique exposure as the nation’s capital to the federal government through economic, financial, capital market and governance linkages,” Moody’s said in a report. It affirmed Washington’s Aaa issuer rating, while also cutting its outlook on the Smithsonian Institution in DC and the Washington Convention & Sports Authority to negative.

Moody’s lowered its outlook on the US Friday, signaling it was inclined to downgrade the nation from the top Aaa level because of wider budget deficits and political polarization. The US is staring down a government shutdown on Nov. 18 if Congress doesn’t reach an agreement to pass short-term spending bills.

Read more: US’s Last Top Credit Rating Is Threatened in Shift by Moody’s

In cutting DC’s rating Monday, the ratings agency noted that government spending makes up more than 45% of the district’s gross domestic product. Washington is “particularly exposed to federal government employment and wages derived from it,” Moody’s said.

While DC sets its tax rates, Congress must approve the district’s annual budget, Moody’s. “Congress has ultimate authority over the District and thus DC does not have the fiscal autonomy that states do,” according to the report.

Moody’s is the only one of the three main credit companies that still rates the US in the top tier after Fitch Ratings downgraded the US government in August following the debt-ceiling battle and S&P Global Ratings stripped the US of its top score in 2011 amid that year’s debt-limit crisis.

Moody’s says that given the negative DC outlook, it is unlikely to upgrade Washington’s ratings in the next 12 to 18 months and may consider a downgrade if the US rating is lowered. The credit-rating firm affirmed its Aaa rating on the Smithsonian’s revenue bonds, and its Aa3 grade for the WCSA.