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Announcement:

Moody's requests comment on proposed changes to US local government GO bond rating methodology

Global Credit Research - 14 Aug 2013

New York, August 14, 2013 -- Moody's Investors Service is requesting comment from market participants on several changes it is proposing for how it rates US local government General Obligation bonds. Moody's is proposing to increase the weight its analysis attaches to debt and pensions to 20% from 10%, to decrease the weight it attaches to economic factors to 30% from 40%, and to introduce a scorecard for US local governments, to enhance the transparency of the rating process.

An increase in the weight attached to debt and pensions would recognize the potential for large pension liabilities to constrict local government's financial flexibility, says Moody's. Because pension liabilities and debt each represent enforceable claims on the resources of local governments, Moody's says the debt portion of its current methodology should be weighted more heavily to capture the combined effect of both debt and pensions.

A reduction in the weight attached to economic factors would acknowledge evidence of some local governments either unwilling or unable to convert the strength of their local economies into revenues, says Moody's. Tax caps, anti-tax sentiment, the natural lag between economic activity and its conversion into government revenues, and a variety of other factors often place obstacles between municipal governments and the wealth generated by their local economies.

The scorecard that the revised methodology proposes would provide a composite score based on various measures of the key factors Moody's considers most important to local government GO credit analysis. The scorecard would not be a final rating, only a starting point for analysis.

If the proposed revisions to the methodology are adopted, some GO ratings would be expected to change as a result, though the vast majority would not. Any potentially affected ratings would be placed on review upon publication of the final methodology.

Moody's asks market participants to comment on the proposed methodology by Monday, October 14, 2013. Comments should be sent to RFC@moodys.com using the RFC Response Form available on the Request for Comment topic page on www.moodys.com.

Moody's rates approximately 8,000 US local governments, mostly cities, counties and school districts.

The Request for Comment "US Local Government General Obligation Bond Methodology" is available on Moodys.com at https://www.moodys.com/research/US-Local-Government-General-Obligation-Bond-Methodology--PBM_PBM151664.

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Matthew A Jones
Senior Vice President
Public Finance Group
Moody's Investors Service, Inc.
One Front Street
Suite 1900
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U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Julie A Beglin
Vice President - Senior Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Jack Dorer
Managing Director
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's requests comment on proposed changes to US local government GO bond rating methodology
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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