Posted on 04/08/2009 4:57:33 PM PDT by Lorianne
The first-ever assignment of a sector-wide outlook for US local government ratings is negative, says Moody's Investors Service in a new report on what it expects fundamental credit conditions to be like for the sector over the next 12 to 18 months.
"The negative outlook reflects the fiscal challenges local governments face as a result of the housing market collapse, dislocations in the financial markets, and a recession that is broader and deeper than any recent downturn," said Moody's Senior Vice President Eric Hoffmann, author of the report. "The current economic environment will clearly pose significant challenges for many if not most local governments."
He said sharply falling property values, contracting consumer spending, job losses, and limited credit availability lead the long list of developments that will make balancing budgets in the coming year particularly difficult.
"The report outlines the key challenges facing local governments in the current environment and highlights what will likely drive rating decisions," said Hoffmann. "These are standard elements of our existing rating methodology that have taken on increased importance in light of the particular challenges of current economic and credit conditions."
He said these include each local government's exposure to industries that are particularly at risk in the current downturn and to market volatility, particularly the potential liquidity implications of failed remarketings of variable rate debt. Volatile and declining revenue sources that are particularly sensitive to economic fluctuations, including sales and real estate transfer taxes, is another area of increased concern.
"Similarly, local governments with above-average expenditures that are legally mandated or effectively fixed in the near-term will be subject to increased scrutiny," said Hoffmann.
Individual local governments that stand out as having relatively high exposure in one or more of these areas could be subject to downward rating pressure, says the Moody's report.
"This could be offset by the demonstrated willingness and ability of management to make rapid, if not multiple, mid-year budget adjustments, and to maintain consistently conservative budget assumptions," said Hoffmann.
He cautioned that the negative sector outlook does not suggest that the prospects for local government credit ratings are uniformly negative.
"Its meaning is distinct from our rating outlooks for individual credits, which are predictive of future rating direction for that particular credit," said Hoffmann. "The governance strength of individual issuers and their willingness and ability to adapt will determine the overall trend in individual ratings."
Someone must have woke them up after they blew the ratings of the derivitives in the loan crisis.
Didn’t they get the notice? The Stimulus is working.
Also, this is another flaw in the plan for the Florida Welfare Marlins stadium. They’re going to have to float bonds to pay for the construction. Of course, the Taxpayer is responsible for all the interest, so it matters little to David Samson and Jeffrey Loria.
Are the folks that rate investment bonds - they were the ones telling investors the stuff they were buy was rated AAA not leverage 30-1.
Moody, S&P, Fitch are really as much to blame as government and Wall Street for current challenges.
This is an outrage. US debt is backed by the blood, sweat, and tears of tens of millions of servile drones yet to born.
The political class ran ou of “other people’s money” for the nanny state nonsense.
Oh, wait...they might never be born...clearly this is a call based upon the future of the abortion industry under the present administration.
For too long, city and state government have allowed unlimited pensions and health care benefits. Now with a slight shrink in population in our cities, the numbers don’t work anymore.
“Hard driving decisions” have a huge, positive, effective impact,.... as always...right??
Oh, and if you own munis right now... capital loss as rates instantly adjust to cover the increased risk.... Muni bond fund? Ouch!
What’s the salary of a generic bond rater?
Where do these folks live?
Where are the postings showing their faces and names?
Then, just for giggles...how many of these folks have been charged with a crime or even had their hands slapped by a profession accreditation committee......NONE!!!
That is why, this is all a huge terrible scam on America and we need to stop it and get it fixed. Everyone in power today benefited from it and we need to have the criminal class removed.
Sadly, history always repeats itself and the mob runs America again. We have to stop it again.
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