Moody’s Revises Rating Criteria for Local Governments

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On January 15 of this year, Moody’s announced a revised methodology for its evaluation of local government general obligation credits. Moody’s overall methodology is to evaluate each locality seeking/maintaining a rating over four categories: (1) economy/tax base of the area, (2) finances of the locality (fund balance), (3) management of the locality and (4) debt/pensions. Their revised methodology decreases the weight given to economy/tax base factors and increases the weight given to debt/pension load by a similar percentage. They have also announced a scorecard to make more explicit the criteria they consider in each category.

What does this mean to your locality? It means smaller localities may have an opportunity for a boost in ratings, but it also means that unfunded pension liabilities are being factored more heavily against localities than ever before.  

Topics:  Moody's, Municipalities, Rating Agencies

Published In: General Business Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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