- Associated Press - Tuesday, March 31, 2015

RALEIGH, N.C. (AP) - Companies that judge how likely big borrowers are to repay their debt have given their top rating to North Carolina ahead of a new round of bond sales, state Treasurer Janet Cowell’s office said Tuesday.

Rating agencies Standard & Poor’s, Moody’s Investors Service and Fitch Ratings are again giving North Carolina their top grade as the state looks to borrow $225 million next week. State officials plan to sell bonds to fund construction and renovation of university buildings, psychiatric hospitals, state offices and a new crime lab in western North Carolina.

North Carolina is one of 10 states to earn the “AAA” bond rating from all three agencies. That’s been true the past eight years, when the last of the three companies upgraded their rating after holding back for five years. The high credit rating gives the state lower borrowing costs.

“This is significant in keeping financing costs low as the state contemplates infrastructure investment,” Cowell said in a statement.

North Carolina “has a low-to-moderate debt burden and strong debt management practices, including an affordability planning process” that limits how much the state can borrow, Fitch Ratings said in its analysis. “Pension funding is among the strongest of the states.”

North Carolina also has made steady progress rebuilding an emergency fund drawn down during the recession years to $654 million, the ratings agencies said. The state retains another $1.5 billion in separate trust funds, special accounts and the Golden Leaf economic development nest egg funded from a big legal settlement with cigarette companies.

The growing state’s slowly improving economy has been hampered by limited growth in manufacturing jobs, which represents 11 percent of North Carolina employment, Moody’s said. But growth in professional, business, health and educational services now total more than a quarter of the state’s jobs, exceeding the nation’s growth in those sectors, the company said.

The state’s unemployment rate in February was 5.3 percent, better than the national average of 5.5 percent.

All three ratings agencies said one question mark in North Carolina’s public finances is the long-run impact of state personal and business tax cuts in 2013 that are expected to trim $1.2 billion from state coffers in the next two years, Moody’s said.

“Given the significant changes in tax policy and ongoing revenue underperformance, Fitch believes downside risk to the forecast for the current fiscal year remains,” the ratings company said.


Emery P. Dalesio can be reached at https://twitter.com/emerydalesio

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