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The credit crunch that is making it hard for consumers with good credit to get mortgages and car loans also is pinching local governments with AAA ratings.

And if local governments can't borrow money, projects such as schools and roads — which would boost the beleaguered construction industry — can't get started, said Jacqueline Byers, director of research for the National Association of Counties.

"This is the contribution local governments can make to get this turned around, but they're not going to if they don't get money," Byers said.

Montgomery County, one of Maryland's four counties with a AAA rating, is pondering what to do about a complex project consolidating county services.

Although County Executive Isiah Leggett (D) says the plan ultimately will save the county money, the projects needs $274 million in a short-term loan.

County Council President Michael J. Knapp said the county will have to consider whether to put the project on hold or go forward at a higher cost.

"That's kind of the scenario that's playing out," said Knapp (D-Dist. 2) of Germantown.

When rating agencies award a jurisdiction a AAA rating, it's a benchmark for a safe investment. Investors earn lower yields, but they face less risk, too.

Byers said the credit crunch for local governments dates back to January, when Wall Street ratings agencies began downgrading the insurers of municipal bonds.

The insurers are the middlemen between the investor and the local government, and the rating agencies nicked their ratings because of their investments in the subprime mortgage market, she said.

Without the insurers, the market has fewer bidders for municipal bonds, and investors instead are turning to Treasury bonds.

"A lot of people who are worried are worried about everything. They see the budget shortfalls and think they should switch to Treasury bonds," Byers said.

Byers said NACO questioned county governments, and 71 percent surveyed said their biggest problem with issuing bonds was that the interest rate was too high. Fifty-eight percent said they would delay a bond sale.

Writing for NACO's Web site, Byers described how several AAA-rated counties are delaying or thinking twice before they issue bonds for capital projects. For example, Henrico County, Va., could postpone a $95 million bond sale for schools, fire stations, parks and roads, because rising interest rates would make the projects too expensive.

"The counties still in the market are paying the higher rates. They have to be. They don't have a choice," she said. "Those that have a choice are not in the market right now."

There are some signs that credit may be loosening. California was able to sell $5 billion in bonds last week, and $4 billion was sold to individual investors, according to the Sacramento Bee.

Investors are starting to return to the municipal market.

"What they're seeing is all the effects globally to inject liquidity into the credit market are starting to thaw things out," said JoAnne Carter, managing director of the PFM Group, an independent provider of financial and investment advice.

The changing nature of the credit issue means day-to-day changes.

"I don't think anybody is an expert right now," Byers said.