One of the major bond rating agencies, Fitch Investor Services, has reaffirmed its top rating of AAA for Charles County general obligation debt. The report from Reuters news service points toward a range of factors behind the rating, but spends considerable time addressing the county’s prudent reserve funding policy:

HEALTHY RESERVE LEVELS

Financial operations are strong and reserve levels are expected to remain healthy, given year-to-date fiscal 2013 performance. The county had systematically used reserves that were accumulated during the economic boom, largely to fund capital and other one-time needs although occasionally to compensate for revenues weakened by the recession.

One interesting note from the Fitch analysis is the favorable view of the county’s income tax rate being below the state limit of 3.2%:

Fitch views the county’s margin under the state income tax rate cap and a regionally competitive property tax rate as an important measure of financial flexibility given their combined dominance of the general fund revenue base.

In recent years, Annapolis policymakers have increasingly looked toward county tax rates – notably the income tax – as an indicator of remaining county “ability to pay.” The Fitch analysis adds another dimension to this debate, recognizing the value of added revenue flexibility Charles County (and some other jurisdictions) retain.