Officials say Moody’s downgrade tied to fall in available fund balance; S&P unchanged

At a meeting of the Merrimack County Board of Commissioners, county finance staff reported that Moody’s had downgraded the county’s bond rating while S&P’s rating remained unchanged.

A finance staff member identified as Aaron told commissioners the downgrade reflected a decline in the county’s available fund balance over recent years. “We went from a 20% fund balance in 2021, and we're closer to 10% at this point in time,” Aaron said. He said the county intends to add roughly $1 million to fund balance in 2025 and aims for a 2026 budget that does not use fund balance.

Why it matters: Bond-rating changes can affect the interest rates the county pays on debt. Aaron said the downgrade to Moody’s could raise borrowing costs by a few basis points but that S&P’s strong rating would limit the impact. He said Moody’s outlined that a sustained multiyear trend of balanced operations and a fund balance above 20% could lead to an upgrade.

Discussion and follow-up: Commissioners asked whether interest rates on upcoming bond issues would change significantly. Aaron said because S&P remained strong, the impact should be limited. The county said it will continue monitoring reserves and noted the policy target is above the current level.

Ending: Officials said they will pursue budget and operational steps to rebuild reserves and noted continued communication with bond counsel and rating agencies as needed.