Moody's Announces New Approach To Analyzing State, Local Government Pensions - 29 Local Governments Placed Under Review

Published on April 2021 | Categories: Documents | Downloads: 0 | Comments: 0 | Views: 35
of x
Download PDF   Embed   Report

Comments

Content

 

Announcement: Moody's announces new approach to analyzing state, local government pensions; 29 local governments gov ernments placed under review Global Credit Credit Research - 17 Apr 2013 New York, April 17, 2013 -- Moody's has announced its final approach to the way it will analyze and adjust pension liabilities as part of its credit liabilities c redit analys analysis is of s state tate and lo local cal governments. These changes reflect the rating agency agency's 's view that pension obligations obligations are a s signifi ignificant cant sourc source e of credit cr edit pressure for governments governments and warrant warr ant a more conservative conserv ative view of the potentia potentiall size of the obligations. obligations. As a result of this new approach, Moody's has also placed the general obligation ratings of the cities of Chicago, Cincinnati, Minneapolis, and Portland, OR, and of 25 other US local governments and school sc hool districts on review for possible downgrade. The entities entities whose ratings have been placed on review rev iew have large adjusted net pension liabilities liabilities relative to their rating c category. ategory. "Pension obligation obligations s represent r epresent a growing source of budgetary budgetary pressure for many governments. However, the manner mann er in which these obligations obligations are reported varies widely, and we believe liabilitie liabilities s are underreported from a balance balan ce sheet s heet perspective," said Timothy Blake, a Moody's Managing Managing Director. "The purpose of the adjustmen adjustments ts is to provide greater transparency and comparab comparability ility in pension liability liability measures for use in credit c redit analysis." The rating agency agency first announced in July 2012 its intentio intention n to make changes to the way it looks at the pension data reported by US state and local governments as it evaluates their credit c redit quality and initiated initiated an open comment period for market participants. The rating agency' agency's s new approach is outlined in the report "Adju "Adjustments stments to US State and Local Government Reported Pension Data", available available on the c compa ompany's ny's website at http://www.moodys.com/viewresearchdoc.aspx? docid=PBM_PBM151398.. docid=PBM_PBM151398 Concurrently, Moody's has also released a revised "US States Rating M Methodo ethodology" logy" (http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM129816) http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM129816) and "General Obligation Bonds Issued by US Local Governments" (http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151690 ( http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151690), ), which describe desc ribe how it will apply the adjusted pension data to its ratings of those entities. The updated state methodolo meth odology gy introduces a scorecard s corecard with ex explicit plicit weights for various rating factors and sub-factors including pensions, as a guide to approximate credit quality. The adjustments adjustments are not a requirement or guideline guideline for s state tate or local governmen gov ernments ts to report or fund their pension obligations. oblig ations. Moody's Moody's is introducing them solely for the purpose of evaluati ev aluating ng pension risk in the context of its credit ratings. "Significant "Signi ficant Outliers" Moody's said that for the majority of US governments, their pension obligations remain manageable in the context of their revenues and resources. "The local governments governments whos whose e ratings have been placed on review were determined determined to be significant outlie outliers rs in their current rating category," Moody's Moody's Blake said. The median ratio of Moody's adjusted net pension liability to annual operating revenues as of fiscal 2011 is under  100%.. The threshold for Aaa-rated governments to be placed under review as a result of this metric was 300%, or  100% more than three times the median level for the sector. The thresholds applied to entities rated in the Aa, A, and Baa categories were 400%, 500%, and and 600% respectively. A summary of the key k ey input data and the Moo Moody's dy's adjustments adjustme nts for each eac h entity with ratings placed under review is av availab ailable le at http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM152921. http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM152921. Moody's rates over 8,000 local governme Moody's governments nts in the United States. Less than 1% of those with general obligatio obligation n or  equivalentt ratings have been placed under review because of the new pension adjustment equivalen adjustments. s. No s state tate governmen governmentt ratings are affected as a result of these changes c hanges at this time. However, rising ris ing pension liab liabiliti ilities es have been a factor  in a number number of state s tate and local government government credit rating downgrades and outlook changes over the last sev several eral years.

 

Moody's expects any rating changes resulting from the current reviews to be one or two notch downgrades and, Moody's depending on mitigating factors, some ratings could be confirmed. Most reviews should be completed within 90 days, but some could take as long as 180 days, if necessary.  As part of its analysis, analysis, Mood Moody's y's has also condu conducted cted a review of recentl recently y ena enacted cted pen pension sion refo reforms rms in rele relevant vant states and jurisdictions, to determi determine ne whether the changes would be likely to rresult esult in a material reduction in accrued pension liabilities liabilities subsequent to the fisc fiscal al 2011 reporting date date.. The reviews affect a total of approximately $12.5 billion of debt. For a number of governments, certain of their  special tax, lease, and/or other related ratings have been placed under rreview eview as well as their general obligation obligation (G.O.) debt. The list of local government ratings placed on review follows:  Alamog  Ala mogordo ordo (City o of) f) NM -- Aa3 General General Obli Obligat gation ion bonds; bonds; A1 Gross Receipts Receipts Tax Revenue Revenue bonds bonds Carman-Ainsworth Community School, MI -- Aa3 General Obligation bonds; A1 Limited Tax G.O. bonds Chicago (City of) IL -- A Aa3 a3 General Obligation Obligation bonds; Aa3 Sales Tax Revenue bonds Cincinnati (City of) OH O H -- Aa1 General Obligation Obligation bonds; Aa2 Economic Development Revenue bon bonds; ds; Aa2 Recovery Zone Facility Rev Revenue enue bond bonds; s; Aa2 Annual Appropriation Appropriation bonds Douglas (County of) NV N V -- Aa2 General Obligation Obligation bonds Dublin City School District, Distric t, OH -- Aaa General G eneral Obligation Obligation bonds bonds Elk Grove Gr ove (Village of) IL -- Aaa General Obligation Obligation bonds Evanston (City of) IL -- Aaa General Obligation Obligation bonds Fairfield Fairfiel d City S S.D. .D. (Butler County), OH O H -- Aa2 General Obligation Obligation bonds Fruitport Community School District, MI -- Aa3 General Obligation bonds Glen Lake Community Schools, MI -- Aa2 General Obligation bonds Great Oaks Inst. of Tech. & Career Dev., D ev., OH -- - Aaa General Obligation Obligation bonds Lakota Local S.D. (Butler County), OH -- - Aaa General Obligation bonds bonds Las Vegas (City of), NM -- A1 Gross Receipts Tax Revenue bonds Mason City School Sc hool District, OH -- Aaa G General eneral Obligation Obligation bon bonds ds Minneapolis (City of) MN -- Aaa General Obligation bonds Murray (City of) KY ---- Aa3 General Obligation bonds bonds Napoleon Napoleo n (City of) OH -- Aa3 G General eneral Obligation Obligation bon bonds ds Oak Hills Local School District, OH O H -- Aa2 General G eneral Obligation Obligation bo bonds nds Orange City School District, Distric t, OH -- Aaa General Obligation Obligation bonds bonds Petoskey Public Schools, MI -- Aa2 General Obligation Obligation bonds Portland (City of) OR --Aaa General Obligation bonds; bonds; Aa1 Limit Limited ed Tax General Obligati Obligation on bonds; Aa2 Housing Hous ing Revenue bonds; Aa2 Gas Tax bonds; Aa3 Urban Renewal and Redevelopment Redevelopment bonds Santa Fe (City of) NM -- Aa2 General G eneral Obligation Obligation bo bonds; nds; Aa2 Gross Receipts Tax Revenue bonds; Aa3 Gross Receipts Tax Revenue R evenue bond bonds; s; A1 Subordinate Lien Lien Gross Receipts Tax bonds Santa Fe (County of) NM -- Aaa General Obligation Obligation bonds; Aa1 Gross Receipts Tax Revenue R evenue bond bonds s

 

Sycamore Community Community Sc School hool District, OH -- Aaa G General eneral Obligation Obligation bonds; bonds; Aa1 Certificates of Participation Tolles Tolle s Career and Technical Center, OH -- Aaa G General eneral Obligation Obligation bonds bonds Trenton Public Schools, MI -- Aa3 General Obligation bonds Virginia (City of) MN -- A2 General Obligation Obligation bonds; A3 Health Care Facilities Lease Revenue Rev enue bon bonds ds Wayne County Joint Vocational S.D., OH -- Aa3 Certificates of Participatio Partic ipation n PRINCIPAL METHODOLOGY The principal methodology used in rating the general obligation bonds was General Obligation Bonds Issued by US Local Governmen Gov ernments ts published in April 2013, the principal methodo methodology logy used in rating the gross receipts tax, sales tax, tax , and gas tax bonds was US Public Finance Special Tax Methodolog Methodology y published in March 2012, the principal methodolog methodology y used in rating the economic development, recovery zone facility, annua annuall appropriation, appropriation, urban renewal and redevelopment, redevelopment, certificates of participation, participation, and health care faciliti fac ilities es lease bonds was The Fundamentals Fundam entals of Credit Analys Analysis is for Lease-Backed Municipal Obligatio Obligations ns published in Dec Decembe emberr 2011, and the principal methodology used in rating the housing bonds was Moody's Approach to the Moral Obligation Pledge published in 1999. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class c ategory/class of debt, thi this s announcement p provides rovides c certain ertain regulatory regulatory disclosures in relation relation to each rating of a subsequently issued bond or note of the same series or category/c category/class lass of debt or pursuant to a program for which the ratings are derived exc exclusively lusively from exis existing ting ratings ratings in acc accordance ordance with Moody's Moody's rating practices. For ratings is issued sued on a support provider, this announceme announcement nt provides certain regulatory regulat ory disclosures in relation to the rating rating action on the support provider and in relation to each particular rating action for securities that derive their credit cr edit ratings ratings from the support provider's credit rating. For provisional rating ratings, s, this announcement announcement provides certain c ertain regula regulatory tory dis disclosures closures in relation to the provisional ratin rating g assigned, ass igned, an and d in relation relatio n to a definitive rating that ma may y be as assigned signed subsequent to the final issuance of the debt, in each case c ase where the transaction structure str ucture and terms have not changed c hanged prior to the ass assignm ignment ent of the definitive rating in a manner  that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for  the respective issuer on www.moodys.com. Toby Cook Vice President - Senior Analyst Public Finance Group Moody's Investors Service, Inc. 600 North Pearl Street Suite 2165 Dallas, TX 75201 U.S.A. JOURNALISTS: JOURN ALISTS: 212-553-037 212-553-0376 6 SUBSCRIBERS: 212-553-1653 212-553-1653 Timothy?F?Blake Senior Vice President Public Finance Group JOURNALISTS: JOURN ALISTS: 212-553-037 212-553-0376 6 SUBSCRIBERS: 212-553-1653 212-553-1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: JOURN ALISTS: 212-553-037 212-553-0376 6 SUBSCRIBERS: 212-553-1653 212-553-1653

 

  © 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.   CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. VOLATILIT Y. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTM INVESTMENT ENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.  

 ALL INFORMATION INFORMATION CONTAINED CONTAINED HEREIN HEREIN IIS S PROTECTED PROTECTED BY LAW LAW,, INCLUDING INCLUDING BUT NOT LI LIMI MITED TED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN information contained edty herein is obtained by MOODY'S from sources belie believed ved by it to be acc accurate urateCONSENT. and reliable. reliable.All Because of thecontain possibili poss ibility of human or mechanical error as well as other factors, factors , however, all information information contained herei herein n is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary necess ary measures s so o that the inf informatio ormation n it uses in as assigning signing a credit rating is of sufficient quality quali ty and from sources Moody's Moody's considers to be reliable, includin including, g, when appropriate, independe independent nt third-party sources.. However, MOODY' sources MOODY'S S is not an auditor and cannot in every every instance independently independently verify or validate information informa tion received in the rating process. Under no circumstances circ umstances shall MOODY'S have any liability to any person or entity for (a) any loss or dama damage ge in whole or in pa part rt caused caus ed by, resulting from, or relating relating to, any error  (negligent (neglig ent or otherwise) or other circ circumstance umstance or contingency within or outside the control of MOODY'S or any of  its directors, directors , officers, employees employees or agents in connection with the procurement, collection collection,, compilation, compilation, analysis, interpretation, interpreta tion, communication, communication, publi publication cation or delivery of any such s uch information, information, or (b) any direct, indirect, special, s pecial, consequential,, c consequential compe ompensatory nsatory or incidental dama damages ges whatsoever whatsoev er (including without limitation limitation,, lost profits), even if  MOODY'S is advised in advance of the possibility of suc such h damag damages, es, resulting res ulting from from the use of or inability inability to use, any such s uch informatio information. n. The ratings, financial reporting reporting analysis, projections, and other observations, if any, constituting part of the information information c contai ontained ned herein are, and must be c construed onstrued solely as, statem s tatements ents of opinion and not statements statements of fact or recomme r ecommendatio ndations ns to purchase, sell s ell or hold any any securities. s ecurities. Each user of the information informa tion containe contained d herein must make its own study and evaluati ev aluation on of each s security ecurity it may consider purchasing, purc hasing, holding holdi ng or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH

 

RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.  

MIS, a wholly-owned wholly-owned credit cr edit rating a agency gency s subsidiary ubsidiary of Moody's Corporation ("MCO"), hereby disc discloses loses that most issuers of debt securities (including ( including corporate and municipal municipal bon bonds, ds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the indep independence endence of MIS's ratings and rating processes. proces ses. Information Information regardin regarding g certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under www.moodys.com under the heading "Shareholder "Shareholder Relations — Corporate Governance G overnance — Director and Shareholder Affiliation Policy."  

For Australia only: Any publication publication into Australia of this document is pursuant to the Aus Australian tralian Fin Financial ancial Services License of MOODY'S MOODY' S affiliate, affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 336969 and/o and/or  r  Moody's Mood y's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 383569 (as applicable). applicable). This document is intended to be provided only to "wholesale clients" within the meaning meaning of section 761G of the Corporations Act Ac t 2001. By continuing to to access acces s this document from within Australia, Australia, you represent to MOODY'S MOODY' S that you are, or are accessing acces sing the document as a representative of, a "wholesale client" and that neithe neitherr y you ou nor the entity you represent will directly or indirectly disseminate this document or its c contents ontents to "retail clients" within the meaning meaning of  section 761G of the Corporations Act 2001. MOODY'S credit c redit rating is an opin opinion ion as to the creditworthiness of a debt obligatio obligation n of the issuer, not on the equity securities of the issuer iss uer or any form of security sec urity that is av availab ailable le to retail clients. It would be dangerous dangerous for retail clients to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your y our financial or other professional adviser.

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close