Rich Madaleno Credit: Dan Schere

A report from a Wall Street credit rating agency that labeled Montgomery County’s decision to defer putting money into a health benefit trust fund for retirees as a “credit negative” is being seen as a warning by at least one County Council member.

New York-based Moody’s Investors Service released a report May 22 that criticizes the county for not fully funding the health benefits, known as known as Other Post-Employment Benefits, or OPEB, in the budget year that starts Monday.

The report was part of a Moody’s weekly newsletter that contains credit outlook news from local governments around the country, according to Moody’s spokesman Joe Mielenhausen.

“The county will accumulate assets more slowly and thus carry higher unfunded liabilities,” it reads.

Mielenhausen said this was the first time in five years Montgomery County had been included in the newsletter.

Moody’s is one of three credit rating agencies that determine whether the county will maintain its Triple-A bond rating, an indication of the county’s fiscal sustainability and creditworthiness. A higher rating means the county can sell bonds for major projects at lower interest rates.


Andrew Friedson, the only council member to vote against deferring $89.5 million from OPEB last month, said he found out about the Moody’s report earlier this week.

“Anything that would jeopardize that bond rating. Any warnings about that bond rating have to be dealt with the utmost significance and seriousness,” he said.

Friedson, who formerly worked in the state comptroller’s office, said the county’s fiscal plan consists of three major objectives, which include bringing down the debt, achieving a 10% reserve level and fully funding OPEB.


“You cannot just commit to two legs of a three-leg stool when it comes to the fiscal plan,” he said.

Council President Nancy Navarro said in a statement issued Friday that the council is taking the Moody’s comment “seriously.”

County Executive Marc Elrich proposed diverting OPEB funds help make up for an $80 million state tax revenue shortfall and bolster the county’s reserves.


“The county executive puts the council in a very difficult situation when he effectively balances the budget on this diversion of $89.5 million. Certainly my colleagues expressed concern. I preferred that we reject the diversion entirely,” Friedson said.

County Budget Director Rich Madaleno said he doesn’t believe the Moody’s report sends a negative signal.

“They’re just saying we are diverging from our plan. They’re not saying that’s a bad thing. They’re saying this is a Triple-A bond rated county and they’re diverting money from this year,” he said. “It’s not like they told us they’re on credit watch. This was their news division.”


Madaleno said Montgomery’s fiscal condition is good.

“Compare us to Baltimore County, whose reserves are half of ours and whose pension is in a totally different position and is still Triple A-bond rated. Our county has made an incredibly aggressive promise to fund its long term OPEB liability,” he said.

Chief Administrative Officer Andrew Kleine said Friday that Moody’s sent the executive branch the report roughly a day before its publication on May 22. Kleine said the executive branch did not share it with the council at the time.


“Historically the executive branch has been good about giving information to the council. This was an oversight. We’ve had communication with the council about making sure it doesn’t happen again,” he said.

Kleine added that the report was “cautionary” and that the executive branch is “taking it seriously” but that it doesn’t mean the Triple-A bond rating is in danger.

Thomas Aaron, a senior analyst with Moody’s who wrote the report, said the comments should be viewed simply an analysis that says Montgomery will have greater financial obligations in the future.


“It’s not our place to call something more fiscally responsible or not. In this case, the county made a choice to reduce its contributions to the OPEB trust fund in favor of hitting other reserve targets,” Aaron said.

Aaron emphasized that the report has no bearing on the county’s credit rating and that the OPEB deferment simply made the newsletter because it could be something that “is of interest to investors.”

The Moody’s comments were first reported by Bethesda Beat columnist Adam Pagnucco in an online analysis posted Friday afternoon.


Dan Schere can be reached at