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Global Credit Research - 04 Dec 2013
New York, December 04, 2013 -- Moody's Investors Service has revised its outlook for the US local
governments to stable from negative as housing markets continue to stabilize,
municipalities' fund balances remain stable, and cities and
school districts modify their expenses. Conditions, however,
will remain more difficult for local governments than they were before
the 2008 recession, and pockets of serious credit pressure remain.
"The 'new stable' will be an era of constrained resources,
but the worst is over for local governments in most of the country,"
says Naomi Richman, a Moody's Managing Director, in
the report "2014 Outlook -- US Local Governments."
The outlook expresses Moody's expectations for the fundamental credit
conditions in the sector over the next 12 to 18 months. A stable
sector outlook indicates that Moody's does not expect conditions
to change significantly.
Helping credit quality, local government revenues should increase
over the next two years as housing markets stabilize, although not
all areas are recovering at the same pace.
Most states have also begun to restore funding cuts to local governments
as state finances improve. State assistance, however,
remains below levels they reached before the recession.
Also supporting the stable outlook is that most local governments have
recognized the more difficult fiscal landscapes they face and worked to
control costs. They have become more discriminating in labor negotiations,
trimmed salaries, and moved to decrease their leverage, says
Although costs will continue to escalate because of pension and healthcare
obligations, Moody's says the measures local governments have
taken to slow increases will be enough for the sector to generally retain
its financial stability.
A good part of this stability is based on the durability of property taxes,
which have held up well since the economic downturn.
Pockets of credit weakness remain among the local governments, however,
and the Moody's report lists the 12 states where downward credit
stress lingers for cities, counties, or school districts.
These are areas where local governments have been slow to modify cost
structures, the housing recovery lags, or where secular population
and economic shifts have led to sustained declines in the tax base.
Downgrades are likely to remain concentrated in these regions."Overall,
however, the vast majority of local governments retain strong ratings,
while a smaller number continue along a downward path," says
For more information, Moody's research subscribers can access
this report at https://www.moodys.com/research/2014-Outlook-US-Local-Governments--PBM_PBM160299.
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Naomi G Richman
MD - Public Finance
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Public Finance Group
Moody's revises 2014 outlook for US local governments to stable from negative
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
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