Moody’s Investors Service announced yesterday that it has placed under review for possible downgrade the Aaa ratings of 177 public finance credits, affecting a combined $69 billion of outstanding debt. The credits include 162 local governments in 31 states, 14 housing finance programs and one university. The counties affected in Maryland include: Baltimore, Harford, Howard, Montgomery, and Prince George’s.
According to the press release:
“The ratings of these local governments, particularly those with a high economic dependence on federal activity, would be vulnerable to a downgrade of the U.S. government” said Moody’s Senior Vice President Matt Jones, a team leader covering local government ratings. In addition to the risk of federal job reductions, Moody’s review following a U.S. government downgrade would focus on a local government’s reliance on capital markets, its dependence on federal revenues, its sensitivity to macroeconomic cycles, and its available financial resources to offset these risks.
MACo has been closely following this issue for the past few weeks. This announcement comes after the US and five states, including Maryland, have been placed on review for a possible downgrade of their Aaa rating. A briefing before the Budget and Taxation Committee highlighted the effects of a US downgrade on the State. The report by the Department of Legislative Services concluded that even if the United States does not default and there is no federal credit downgrade, Maryland’s credit rating could still be challenged if there are significant federal deficit reductions.
Further coverage of this issue can be found in The Examiner.