State receives top grade for 23rd consecutive year

State Treasurer Colleen Davis announced today that the nation’s three top rating services have all delivered the highest possible rating to Delaware. After presentations from the Office of the State Treasurer, Department of Finance, Office of Management and Budget, and the Governor’s Office, Moody’s, Fitch, and S & P Global Ratings all returned a Triple-A rating.

“The rating signifies Delaware’s ability to meet its financial obligations,” said Treasurer Davis. “It reflects our creditworthiness and allows the State to repay bonds at a lower cost and is a representation of our financial health and management practices.”

Highlights of the evaluation reports include:

• Healthy budget reserves, liquidity, and generally accepted accounting principles (GAAP)
• Recent strong growth allowing the state to fully fund two reserves to a combined 12% of revenues.
• Strong financial management and governance indicated by frequent revenue forecasting and a statutory limit on spending
• Lower business costs and the cost of living relative to neighboring states that could continue to attract new residents.

In its evaluation, Moody’s commented, “The State of Delaware maintains a strong credit position supported by healthy and stable finances, and strong management and governance. The state’s well-established process for monitoring revenue and its statutory limits on annual spending growth are important tools that aid financial management year after year. These tools and the state’s continued growth in reserves provide a cushion should unforeseen fiscal challenges arise or persist.”

Fitch noted, “The state has exceptional financial resilience from strong financial management that has contributed to the maintenance of ample financial cushion through economic cycles.”

Standard & Poor’s provided a similar summary. “Delaware’s demonstrated history of proactive fiscal management and well-embedded strong financial policies underpin the rating,” said S&P Global Ratings credit analyst Geoff Buswick.”

“Delaware remains committed to maintaining its Triple-A bond rating,” Treasurer Davis said. “We will continue to focus on strong financial performance, sound management practices, and effective leadership to ensure we continue to earn top ratings long into the future.”

Treasurer Davis is one of four bond issuing officers in Delaware, along with the Governor, the Secretary of Finance, and the Secretary of State. The next bond sale is scheduled for on or about April 26, 2023.

Wilmington, DE (February 17, 2022) – Finance Secretary Rick Geisenberger announced today that Delaware successfully sold $255 million in general obligation bonds in a competitive bond sale on Wednesday. Of the amount sold, $32.5 million represents a refinancing at lower interest rates, saving taxpayers more than $7.8 million in total debt service over the next 12 years.

“I again thank State employees and the General Assembly,” said Governor John Carney.  “Working together over the past 5 years, we have successfully managed the State’s finances through the turbulence of a major budget deficit, a pre-pandemic recovery, and the COVID emergency.   Now through the resilience of all Delawareans and our business community, we’re emerging from the pandemic stronger than ever.  This confidence is reflected in the public markets by this very successful bond sale.”

The State’s annual sale follows the recent announcement from Fitch, Moody’s and S&P Global Ratings that Delaware has maintained the highest possible AAA rating for its bonds. The rating is assigned based on criteria measuring the state’s economy, financial management, debt load and long-term costs. All three ratings reports highlight Delaware’s history of strong financial governance and specifically note regular fiscal updates, long-term forecasts, and reserve and debt management policies as contributing to the State’s ability to navigate national financial shocks.

Bond proceeds will fund numerous capital projects previously authorized by the General Assembly-including close to $200 million in school construction projects plus funding for housing and community development, National Guard training facilities, the Delaware Public Health Lab, library construction, court facilities, higher education campus improvements, and the rehabilitation of park and wildlife areas.

“Delaware has a well-earned reputation for strong fiscal governance and controls that has been built over many decades,” said State Treasurer Colleen Davis.  “The State’s liquidity has never been stronger and with the guidance of the Cash Management Policy Board, my office will continue its work to build the confidence that underlies the State’s Triple-A bond ratings.”

“Over the last two years, the State has sold $875 million in bonds at an extraordinarily low, average interest cost of 1.76%,” said Secretary Geisenberger.   “Re-affirmation of the State’s Triple-A bond ratings helps to ensure that State taxpayers will continue to save millions of dollars in financing costs and are a testament to the State’s long-term commitment to economic and financial stability.”

The State of Delaware has once again received the highest possible AAA rating from three of the nation’s top rating services, confirming the State’s stable economic outlook for the coming year. The latest round of rating reviews from Fitch, Moody’s and S&P Global Ratings precede the upcoming competitive bid bond sale, intended to fund the State’s ongoing capital program as well as re-funding previous bonds for debt service savings. The sale is scheduled to be held on April 14, 2021.

The rating is assigned based on criteria that include trends in the state’s economy, financial performance and management, overall debt load, and long-term costs. The highest rating, Triple-A, is granted to states that are best able to meet debt obligations during periods of recession or fiscal stress. The higher a state’s credit rating, the lower its cost to repay bonds.

“I want to thank State employees and the General Assembly,” said Governor John Carney. “Our commitment to responsibly managing the state’s spending has provided the financial resilience needed for Delaware to weather the COVID emergency. The continuing strong support of our President and Congressional delegation combined with the resiliency of all Delawareans and our business community will ensure we emerge from this pandemic stronger than ever.”

All three rating reports note the importance of the state’s conservative budget practices, the maintenance of financial reserves, and a proactive approach to tracking and forecasting revenues and expenditures throughout the year. Fitch states that Delaware has “exceptional financial resilience from strong financial management,” which has allowed the state to weather the current COVID-19 pandemic while keeping a stable economic outlook.

S&P notes that “The state continues to see business growth despite the pandemic, including Barclays expanding its U.S. headquarters presence, Goldman Sachs adding a new consumer banking facility, Amazon completing four new facilities, and Incyte (a biopharmaceutical company) adding 400 more jobs.”

Moody’s reports that “Lower business costs and cost of living relative to neighboring states could continue to attract new residents as certain economic sectors have the potential to expand.”

“Thanks to a lot of hard work and the forethought of Governor Carney and his financial team, Delaware is positioned very well,” Treasurer Colleen Davis said. “Strong fiscal controls combined with my office’s handling of cash and investments instill continued confidence that allows the State to maintain its Triple-A bond rating.”

“Delaware’s Triple-A rating continues to save taxpayers millions of dollars through lower interest and financing costs,” stated Finance Secretary Rick Geisenberger. “As state and local governments around the nation wrestle with the fiscal strain of this pandemic, the re-affirmation of Delaware’s bond ratings is a testament to the State’s long-term commitment to economic and financial sustainability.”

Finance Secretary Rick Geisenberger today announced that the State closed on the sale of $250 million in triple-A-rated general obligation bonds in last week’s bond sale. This was the second bond sale within four months.

“New federal tax policy eliminates the State’s ability to ‘advance’ refund its general obligation bonds for savings, so, in November, we took advantage of an opportunity to capture refunding savings of $4.7 million,” said Secretary Geisenberger. Last week’s sale of $250 million will fund capital projects including new schools in the Appoquinimink, Caesar Rodney and Laurel school districts, improvements to many other public schools as well as museums and the Port of Wilmington. These and many other capital projects are authorized by the General Assembly in the annual bond bill.

With triple-A ratings recently reaffirmed by Moody’s Investors Service, Fitch Ratings, and Standard & Poor’s Rating Services, Delaware’s bonds were well received even in the recent volatile marketplace. The sale brought interest from a variety of investors, including bond funds, insurance companies, bank portfolios and separately managed accounts.

States, USDOJ Alleged Moody’s Inflated Ratings and Contributed To Market Crash.

Attorney General Matt Denn joined the U.S. Department of Justice and 20 other attorneys general in announcing a settlement resolving an investigation into Moody’s Corporation, Moody’s Investors Service, Inc., and Moody’s Analytics, Inc. (collectively “Moody’s”) over the companies’ misrepresentations regarding the independence and objectivity of its ratings of structured finance securities, securities which contributed to the 2008 market crash and economic recession that followed.

The settlement includes required business reforms by Moody’s and payments totaling $863 million to the federal government and states.

The residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs) examined in this investigation are structured finance securities that derive their value from the monthly payments consumers make on their mortgages. Despite repeated statements emphasizing its independence and objectivity, Moody’s allowed its analysis to be influenced by its desire to earn lucrative fees from its investment bank clients, and assigned inflated credit ratings to toxic assets packaged and sold by the Wall Street investment banks. This alleged misconduct began as early as 2001, and became particularly acute between 2004 and 2007. These securities, particularly those backed by subprime mortgages, were at the center of the financial crisis. The state does not allege that Moody’s committed any wrongdoing against any individual homeowner with respect to a mortgage.

Moody’s represented to consumers that its Aaa rating carried a specific level of risk, and the investigation found evidence that Moody’s altered its process so that the Aaa rating with respect to certain structured finance securities represented a greater risk than Moody’s disclosed to investors and consumers. Delaware’s investigation found evidence that Moody’s deviated from certain of its published methodologies related to its rating of structured finance securities through the end of 2013. The investigation also found evidence that Moody’s gave in to pressure from big banks, which were powerful, repeat customers that paid Moody’s millions of dollars to rate these securities. The banks needed Aaa ratings in order to sell these securities to institutional investors, such as pension plans and retirement plans.

In addition to the monetary settlement, Moody’s has agreed to a detailed statement of facts in connection with the way it rated RMBS and CDOs leading up to the financial crisis, and significant compliance terms – including an annual certification by the CEO of Moody’s Corporation, which will be provided to the settling states every year for the next four years, certifying that Moody’s is following certain compliance requirements. Delaware’s share of the financial component of the settlement is $6,768,533.

Delaware was represented by Deputy Attorneys General Matthew Lintner, Gregory Strong, and Jillian Lazar in this matter.

Read the U.S. Department of Justice press release, which includes links to the settlement documents, here.