Washington, D.C. is set to issue $1.17 billion in income-tax supported revenue bonds next week. This includes $744.5 million in tax-exempt Series 2026A bonds maturing from 2039 to 2046, which will refund bond anticipation notes, and $426.9 million in taxable Series 2026B bonds maturing from 2027 to 2039, which will refund taxable bond anticipation notes. The bonds are secured by a first lien on income and business franchise taxes, with Moody's noting a very strong coverage of maximum annual debt service at over seven times.
Despite concerns over a shrinking federal workforce, evidenced by a loss of 72,000 federal jobs in 2025, and a weak commercial real estate market, analysts remain optimistic. Moody's upgraded the district's outlook to stable from negative in April, citing stable revenue performance and balanced budget operations, and affirmed a Aa1 rating. S&P assigned a AAA rating and expects revenues to grow 3.1% annually from 2026 to 2030. Fitch, which has not rated these specific bonds, rates the district's issuer default rating AA-plus, capped due to federal oversight concerns.
The city's financial strengths, highlighted by Moody's, include a highly educated workforce, above-average income levels, exemplary fiscal governance, and low pension liabilities. While a budget shortfall in the spring required drawing $150 million from reserves and $300 million in one-time funds, officials attribute this to increasing costs rather than underperforming revenues. Analysts like John Mousseau and Joseph Krist underscore the district's strong credit structure and professional government, mitigating risks from federal government downsizing and potential federal intervention in city affairs.
